If you think in terms of major losses, because losses loom much larger than gains - that's a very well-established finding - you tend to be very risk-averse. When you think in terms of wealth, you tend to be much less risk-averse.
I think one of the major results of the psychology of decision making is that people's attitudes and feelings about losses and gains are really not symmetric. So we really feel more pain when we lose $10,000 than we feel pleasure when we get $10,000.
If owning stocks is a long-term project for you, following their changes constantly is a very, very bad idea. It's the worst possible thing you can do, because people are so sensitive to short-term losses. If you count your money every day, you'll be miserable.
The concept of loss aversion is certainly the most significant contribution of psychology to behavioral economics.
Negotiations over a shrinking pie are especially difficult because they require an allocation of losses. People tend to be much more easygoing when they bargain over an expanding pie.
A person who has not made peace with his losses is likely to accept gambles that would be unacceptable to him otherwise.
People just hate the idea of losing. Any loss, even a small one, is just so terrible to contemplate that they compensate by buying insurance, including totally absurd policies like air travel.
When people think of the outcomes of their decisions, they think much more short term than that. They think in terms of gains and losses.