Repurchase behavior of individual investors, sophistication and regret

This study uses a database of over 6 million 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.