Emotions, not facts, drive investors to sell (via Futurity)

UC DAVIS (US) — Regret and pride guide stock investors more than economic facts — often to their financial detriment—a new study shows.

Researchers looked at each day an investor made a stock purchase and whether the investor had sold those same stocks for a gain or loss during the previous 252 trading days. The team found that investors not only prefer to re-buy a stock that was profitable in the past, but they are also more likely to buy such a stock if it lost value after they sold it. (Credit: iStockphoto)

“Having sold a stock, investors are disappointed if it continues to rise, and regret having sold it in the first place,” says Brad Barber, a professor in the Graduate School of Management at the University of California, Davis. “They anticipate that their disappointment and regret will be more intense if they repurchase such a stock rather than not repurchasing it; thus investors are most likely to repurchase a stock previously sold for a gain that is trading below the price at which they sold it.”

If you have 2 minutes, you can check everything here and have a link to the paper: EmotionsDriveInvestors