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The Role of Prefactual Thinking and Anticipated Counterfactual Regret in a Losing Investment Decision

Korean Journal of Social and Personality Psychology / Korean Journal of Social and Personality Psychology, (P)1229-0653;
2009, v.23 no.2, pp.141-156
https://doi.org/10.21193/kjspp.2009.23.2.008



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Abstract

In the present study, we attempted to explain why people keep losing stocks too long (the disposition effect) with anticipated counterfactual regret. For this aim, we investigated what kinds of prefactual thinking people had when they had a losing stock facing potential loss (study 1) and whether anticipated counterfactual regret had influence on their investment decision (study 2). The results of study 1 demonstrated that people did various kinds of prefactual thinking facing a losing investment situation but that withdrawal regret was the most frequent type. The results of study 2 showed that people made decisions depending on what kind of anticipated counterfactual regret was felt more strongly. That is, those who felt the withdrawal regret more strongly decided to keep their stock, while those who felt the persistence regret more strongly decided to sell their stock. The effect of anticipated counterfactual regret was significant even after controlling related personal variables (e.g., self-enhancing bias, risk taking tendency). Finally, the implication of the results was discussed.

keywords
disposition effect, prefactual thinking, anticipated counterfactual thinking, anticipated counterfactual regret, 처분효과, 사전가정사고, 예상되는 사후가정사고, 예상되는 후회

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Korean Journal of Social and Personality Psychology