Abstract
In a stock market experiment we examine how regret avoidance influences the decision to sell an asset while its price changes over time. Participants know beforehand whether they will observe the future prices after they sell the asset or not. Without future prices participants are affected only by regret about previously observed high prices (past regret), but, when future prices are available, they also avoid regret about expected after-sale high prices (future regret). Moreover, as the relative sizes of past and future regret change, participants dynamically switch between them. This demonstrates how multiple reference points dynamically influence sales.
Original language | English |
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Pages (from-to) | 70-93 |
Number of pages | 24 |
Journal | American Economic Journal-Microeconomics |
Volume | 14 |
Issue number | 1 |
Early online date | 2021 |
DOIs | |
Publication status | Published - 1 Feb 2022 |
JEL classifications
- d91 - "Intertemporal Consumer Choice; Life Cycle Models and Saving"
- c91 - Design of Experiments: Laboratory, Individual
Keywords
- behavioral finance
- dynamic discrete choice
- dynamic regret
- experiments
- multiple reference points
- regret avoidance
- stock market behavior
- structural models
- ANTICIPATED REGRET
- RISK
- MODEL
- CHOICES
- AVERSION
Datasets
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Data and Code for: Dynamic Regret Avoidance
Fioretti, M. (Creator), Vostroknutov, A. (Contributor) & Coricelli, G. (Contributor), ICPSR, 25 Jan 2022
DOI: 10.3886/e130441v1, https://www.openicpsr.org/openicpsr/project/130441/version/V1/view
Dataset/Software: Dataset