A Close-up of Individual Repurchase of Stocks
Other Title
聚焦檢視個人重購股票行為
Journal
證券市場發展季刊
Journal Volume
23
Journal Issue
1
Pages
125 - 157
Date Issued
2011-03
Author(s)
Abstract
Using a dataset provided by a brokerage company in Taiwan, we find that individual investors prefer to repurchase stocks that they previously sold for a gain rather than those that they sold for a loss, which hinges on the simple heuristic that actions that previously resulted in pleasure will be repeated whereas actions that previously led to pain will be avoided. However, the counterfactual argument proposed by Barber, Odean, and Strahilevitz (2004) receives mixed support: investors prefer to repurchase additional shares of stocks that have lost value subsequent to being purchased, which corroborates the counterfactual argument; however, investors prefer to repurchase stocks that have increased in value subsequent to their prior sale, which contradicts the counterfactual argument. In addition, an investor’s repurchase of stocks is more likely to be evidenced using monthly rather than yearly data. A close look at individual characteristics indicates that acquired experience, which is proxied by age, number of trades, and time associated with the brokerage house, could mitigate the inclination to repurchase prior winners rather than prior losers. Also, online and margin investors who tend to be overconfident are associated with a lower inclination to repurchase winners rather than losers. Finally, the inclination to repurchase winners rather than losers is higher in a bear market than in a bull market.
Type
journal article