Date of this Version
We develop a dynamic portfolio choice model which incorporates anticipated regret and pride in individual’s preferences and show that those preferences can cause investors to sell winning stocks and hold on to losing stocks; that is, anticipating regret and pride can help explain the disposition effect.
disposition effect, preferences, regret, pride, investing
Working Paper Number
All findings, interpretations, and conclusions of this paper represent the views of the authors and not those of any institution with which the authors are affiliated. © 2007 Pension Research Council of the Wharton School of the University of Pennsylvania. All Rights Reserved.
Muermann gratefully acknowledges financial support of the National Institutes of Health — National Institute on Aging, Grant number P30 AG12836, the Boettner Center for Pensions and Retirement Security at the University of Pennsylvania, and National Institutes of Health — National Institute of Child Health and Development Population Research Infrastructure Program R24 HD-044964, all at the University of Pennsylvania. Volkman gratefully acknowledges financial support from the Insurance and Risk Management Department at the Wharton School through a Bradley Foundation Scholarship.
Date Posted: 17 December 2019