Regret, Pride, and the Disposition Effect | Zendy

Alexander Muermann | Zendy; Jacqueline Volkman Wise | Zendy

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Regret, Pride, and the Disposition Effect

Author(s) -

Alexander Muermann,

Jacqueline Volkman Wise

Publication year - 2006

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.930675

Subject(s) - pride , regret , disposition , psychology , social psychology , economics , philosophy , mathematics , statistics , theology

Seeking pride and avoiding regret has been,put forward,as a rationale for the disposition e¤ect, the tendency of investors to sell winning stocks and hold on to losing stocks. We develop a dynamic,portfolio choice model,that incorporates,anticipated regret and pride in individual’s preferences to formally investigate this explanation. We specify a setting for which this rationale is satis…ed, but show that it is not robust to variations in the underlying assumptions. JEL Classi…cation D81, G11 Keywords disposition e¤ect, regret theory, dynamic portfolio choice We wish to thank Neil Doherty, Olivia Mitchell, and Harris Schlesinger for their valuable comments. Muermann

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