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The effect of anticipated and experienced regret and pride on investors' future selling decisions

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  • Lee, Carmen
  • Kräussl, Roman
  • Paas, Leo

Abstract

This paper investigates the effect of anticipated/experienced regret and pride on individual investors' decisions to hold or sell a winning or losing investment, in the form of the disposition effect. As expected the results suggest that in the loss domain, low anticipated regret predicts a greater probability of selling a losing investment. While in the gain domain, high anticipated pride indicates a greater probability of selling a winning investment. The effects of high experienced regret/pride on the selling probability are found as well. An unexpected finding is that regret (pride) seems to be not only relevant for the loss (gain) domain, but also for the gain (loss) domain. In addition, this paper presents evidence of interconnectedness between anticipated and experienced emotions. The authors discuss the implications of these findings and possible avenues for further research. --

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Bibliographic Info

Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2012/17.

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Date of creation: 2012
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Handle: RePEc:zbw:cfswop:201217

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Keywords: Regret; Pride; Disposition Effect; Risky Decision;

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References

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  15. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1644-1655, December.
  16. Simonson, Itamar, 1992. " The Influence of Anticipating Regret and Responsibility on Purchase Decisions," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 19(1), pages 105-18, June.
  17. Zeelenberg, M. & Pieters, R., 2004. "Beyond valence in customer dissatisfaction: A review and new findings on behavioral responses to regret and disappointment in failed services," Open Access publications from Tilburg University urn:nbn:nl:ui:12-304446, Tilburg University.
  18. Zeelenberg, M. & Dijk, E. van & Bos, K. van den & Pieters, R., 2002. "The Inaction Effect in the Psychology of Regret," Open Access publications from Tilburg University urn:nbn:nl:ui:12-89429, Tilburg University.
  19. Maria J. Louro & Rik Pieters & Marcel Zeelenberg, 2005. "Negative Returns on Positive Emotions: The Influence of Pride and Self-Regulatory Goals on Repurchase Decisions," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 31(4), pages 833-840, 03.
  20. Cooke, Alan D J & Meyvis, Tom & Schwartz, Alan, 2001. " Avoiding Future Regret in Purchase-Timing Decisions," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 27(4), pages 447-59, March.
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