Buying the same stock -- again: Pride and regret drive investors' decisions

June 1, 2011, University of California - Berkeley

(PhysOrg.com) -- Haas professor Terrance Odean, who studies behavioral finance, finds that trading patterns involving previously owned stock are driven by a desire to avoid or at least limit anticipated regret.

How likely are you to repurchase a you sold?

Professor Terrance Odean, who studies behavioral finance, found that that trading patterns involving previously owned stock are driven by a desire to avoid or at least limit anticipated regret. In other words, investors are likely to repurchase a stock if the sale boosts of satisfaction.

Odean and co-authors reviewed more than 700,000 stock purchases and found that investors are one-half to two-thirds more likely to 1) repurchase stocks previously sold for a gain rather than stocks they previously sold for a loss, 2) repurchase stocks that have lost rather than gained value following a prior sale, and 3) purchase additional shares of stocks that have lost rather than gained value since being purchased.

Explore further: In Brief: Cisco to buy back additonal stock shares

Related Stories

Study: Some stock repurchase plans just empty promises

October 7, 2009

A new study backs longtime speculation on Wall Street that companies sometimes ballyhoo stock repurchase programs they never plan to pursue, hoping to stir a buzz that will mislead investors and pump up sagging share prices.

Recommended for you

Lifting barriers to citizenship for low-income immigrants

January 15, 2018

Taking the Oath of Allegiance at a naturalization ceremony is an emotional moment for many immigrants, and for good reason: it is the culmination of an often arduous process and many years of striving. Citizenship also opens ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.