Dynamic Regret Avoidance

Michele Fioretti, Alexander Vostroknutov () and Giorgio Coricelli ()
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Alexander Vostroknutov: Maastricht University [Maastricht]
Giorgio Coricelli: USC - University of Southern California

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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. (JEL C91, G12, G41)

Keywords: stock market behavior; behavioral finance; regret avoidance; dynamic regret; dynamic discrete choice; structural models; experiments; multiple reference points (search for similar items in EconPapers)
Date: 2022-02-01
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03562318
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Citations: View citations in EconPapers (4)

Published in American Economic Journal: Microeconomics, 2022, 14 (1), pp.70-93. ⟨10.1257/mic.20180260⟩

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Journal Article: Dynamic Regret Avoidance (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03562318

DOI: 10.1257/mic.20180260

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