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Repurchase behavior of individual investors, sophistication and regret

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  • Magron, Camille
  • Merli, Maxime

Abstract

This study uses a database of over 6million trades from a large European brokerage house to investigate the stock repurchase behavior of individual investors from 1999 to 2006. Running survival analysis techniques, we show at an individual level that the duration between a sale and a repurchase is shorter when the investor has had a positive experience with the stock or when the stock has lost value since being sold. More sophisticated investors are significantly less prone to this behavior. Our findings emphasize the importance of regret in financial decisions. Public and private information, tax considerations and contrarian strategy do not drive repurchase behavior.

Suggested Citation

  • Magron, Camille & Merli, Maxime, 2015. "Repurchase behavior of individual investors, sophistication and regret," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 15-26.
    • Handle: RePEc:eee:jbfina:v:61:y:2015:i:c:p:15-26
    DOI: 10.1016/j.jbankfin.2015.08.021
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    Cited by:

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    3. Yuan, Ying & Fan, Xiaoqian & Li, Yiou, 2022. "Do local and non-local retail investor attention impact stock returns differently?," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    4. Poompak Kusawat & Nopadol Rompho, 2023. "Impact of Investing Characteristics on Financial Performance of Individual Investors: An Exploratory Study," Papers 2311.00384, arXiv.org.
    5. D’Hondt, Catherine & Merli, Maxime & Roger, Tristan, 2022. "What drives retail portfolio exposure to ESG factors?," Finance Research Letters, Elsevier, vol. 46(PB).
    6. Chiu, Junmao & Chen, Chin-Ho, 2023. "Limit order revisions across investor sophistication," Journal of Empirical Finance, Elsevier, vol. 70(C), pages 74-90.
    7. Li, Jianbiao & Li, Dahui & Cao, Qian & Niu, Xiaofei, 2018. "The role of regret and disappointment in the repurchase effect: Does gender matter?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 75(C), pages 134-140.
    8. Vohra, Shalini & Davies, Gary, 2020. "Investor regret, share performance and the role of corporate agreeableness," Journal of Business Research, Elsevier, vol. 110(C), pages 306-315.
    9. Catherine D’hondt & Maxime Merli & Tristan Roger, 2021. "What drives retail portfolio exposure to ESG factors?," Post-Print hal-03373287, HAL.

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    More about this item

    Keywords

    Individual investors; Repurchase behavior; Investors sophistication; Regret;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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