Regret Theory

Regret Theory

A theory stating that many investors consider the possibility that they will regret their investment decisions. The spectre of regret may have different effects on different persons. For example, it may motivate one investor to take more risks because he/she would regret not doing so if the price of securities increases a great deal. Likewise, it may motivate another investor to be more risk averse because he/she would regret buying some stocks if the price drops significantly. The study of regret is one example of behavioral finance.
References in periodicals archive ?
They refer to the literature on disappointment theory (Bell, 1985; Loomes and Sugden, 1986) and regret theory (Bell, 1982; Loomes and Sugden, 1982; Quiggin, 1994) when motivating the cushion effect hypothesis.
1994, Regret Theory With General Choice Sets, Journal of Risk and Uncertainty, 8(2): 153-165.
In particular, two of these models are worth noting: the Symbolic-Interpretive Perspective (S-I), and Deci-sional Regret Theory.
Consequently, we applied the postpurchase regret theory to integrate the consequences of PPD.
explains the newest theories behind the study of group dynamics such as Symbolic-Interpretive Perspective, Group Dialectics, Decisional Regret Theory, Social Comparison Theory and Bona Fide Group Perspective, and shows how each can be applied to play groups, cliques, street gangs and even juries.
Regret theory represents the idea that people take into account emotional reactions to outcomes when making decisions.
Braun and Muermann examine optimal insurance purchase decisions of individuals whose behavior is consistent with Regret Theory.
The essential notion underlying regret theory is that people tend to compare their actual situations with the ones they would have been in, had they made different choices in the past.
In those papers I showed that choice based on similarity judgments implies behaviors described by Kahneman and Tversky's (1979) prospect theory for risky alternatives represented as prospects and behaviors implied by Loomes and Sugden's (1982) regret theory for alternatives represented in state matrices used to test predictions of that theory.
Regret theory was initially developed by Bell (1982) and Loomes and Sugden (1982) and has been shown in both the theoretical and experimental literature to be an important factor in explaining individual behavior.
Regret theory is formulated theoretically by Bell (1982, 1983) and Loomes and Sugden (1982).
We examine optimal insurance purchase decisions of individuals that exhibit behavior consistent with Regret Theory.