Regret, Pride, and the Disposition Effect

Working Paper Number

06-07

Publication Year

2006

Authors

Alexander Muermann

Jacqueline Volkman

Paper Abstract

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.

Acknowledgements

Muermann, Alexander and Jacqueline M. Volkman. 2006. "Regret, Pride, and the Disposition Effect." PARC Working Paper Series, WPS 06-07.

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