The Pension Research Council
Working Paper

Regret, Pride, and the Disposition Effect

Alexander Muermann and Jacqueline M. Volkman
WP2007-03

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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.