AMITY BUSINESS SCHOOL

AMITY UNIVERSITY
UTTAR PRADESH

PSDA – 3 (REGRET AVERSION)

SUBMITTED TO: SUBMITTED BY:

DR. RUCHI ARORA MBA (FINANCE)
FACULTY SECTION – A
(BEHAVIOURAL FINANCE) BATCH (2019-2021)

PRATEEK VERMA
NAVEEN REDDY

THE REGRET AVERSION AS AN INVESTOR BIAS

Sümeyra Gaze
CD-ROM. ISSN: 2158-1479 :: 04(02):419–424 (2015)
 International Journal of Business and Management Studies,

OBJECTIVES
 Regret aversion is one of behavioral finance’s topics and is the subject of this study
 To explore the generality of the previous findings. We sought to replicate the dependence
of risky choice on the expectation of feedback using gambles with different pay-offs and
different probabilities.
 this tendency is damaging to their portfolio

 The
 purpose of this study is to
examine theoretically the regret
aversion, its impact on investors'
behavior and
 how to deal with biases
 The
 purpose of this study is to
examine theoretically the regret
aversion, its impact on investors'
behavior and
 how to deal with biases
RESEARCH METHODOLOGY
The purpose of this study is to examine theoretically the regret aversion, its impact on investors'
behavior, and how to deal with biases

RESEARCH TOOLS USED

The tools used were mean (or average), probability.
CONCLUSION & FINDINGS
Ignoring psychology facilitates analysis that examining the economic behavior of individuals but it
makes us out reality. In the last thirty-five years, researches show that psychology should be
considered for a real analysis. Traditional finance assumes that people are rational. Alternatively,
behavioral finance
studies how people behave? Especially in recent years, behavioral finance trying to demonstrate
how psychology affects investor behavior catches the attention. Behavioral finance has led to the
emergence of many studies related to how perceptions, attitudes, heuristics briefly psychology
affect the psychology of investing. Regret aversion is one of the topics examining by behavioral
finance.
Regret is an emotional pain that occurs with the earlier decision to become a bad decision.
According to expect expectancy theory the pain of losses is higher than the joy of gain. For this
reason, investors tend to avoid activities that create regret in the future. In other words, people
avoid actions that create regret and seek actions that cause pride. This is referred to as regret
aversion in the finance literature. Regret aversion leads to many investment mistakes. For
example, the investor who tends to avoid regret may be too
conservative about investment options or may exhibit herd behavior. There is no principle more
fundamental in securities trading than "buy low, sell high". Why is it so difficult to implement a
simple rule? The psychology of investment may be a good descriptor.

SCOPE FOR FUTURE WORK

Future research should help to estimate the size of the regret premium in other decision-making
tasks, such as choice situations, and different stages of the decision-making process.

INVESTMENT DEPOSITS DECISION-MAKING IN BANK: A

BEHAVIORAL FINANCE PERSPECTIVE
Bail Hanopia
Brawijaya University
OBJECTIVES
 The objectives of this research were to analyze determining factors of investment deposits
decision-making for the depositor, and to analyze the most dominant factor of investment
deposits decision-making in Bank NTB of Pejanggik Principle BranchesTo examine the
effect of regret salience on decision process carefulness using a different information search
paradigm
 The instrument of this research was a questionnaire with a total sample of 90 respondents
who were the deposit customers.
  he researches results show that deposits’ interest, gain, and cost, feelings of disappointment
and satisfaction, worries, reluctances, good companies, budget allocation, self-control, net
interest income, belief in net interest income, overestimate and underestimate are factors
determining investment deposits decision-making in Bank NTB of Pelangi Principle
Branches
RESEARCH METHODOLOGY
This was exploratory-descriptive quantitative research. This research finds and describes new
relationships within a wide complex problem. The sample used was the customer of retail deposit
(company) of PT. Bank NTB of Pejanggik Principle Branches with 90 respondents.
RESEARCH TOOLS USED
The data collection method used was the survey method. The sampling technique used to conduct
this research was a non-probability sampling technique, and the data collection technique used was
using the questionnaire. The analysis tool used was factor analysis. Factor analysis is a technique
used to find factors being able to explain the relationship or correlation between various
independent factors observed (Widjojo, 2010).
CONCLUSION & FINDINGS

This research found 27.8% or as

many as 35 respondents are men
and 72.2% (65) is
RJOAS, 2(74), February 2018
119
women. The majority of the
respondent is above 40 years old
and their income ranges
between 2.500.000 IDR ($186.5)
to 3.500.000 IDR ($261.1).
While for deposits value, the
majority of the respondents
deposit their money in the range
of 25.000.000 IDR to
50.000.000 IDR. Time deposit
used by respondents at the most
3-month-time deposit is 86.7%
(78 respondents).
Factors determining investment deposits decision making are deposits interest, deposits gain,
deposits cost, a feeling of disappointment, a feeling of satisfaction and level of satisfaction,
worries, reluctances, good companies, budget allocation, self-control, net interest income, belief on
net interest income, overestimate and underestimate. According to the factor analysis that has been
conducted, so these factors are formed into four-factor groups i.e. deposits cost factor group, factor
group of belief in net interest income, factor group of good companies, and factor group of deposit
benefits. The most dominant factors are deposits cost, deposits interest, a feeling of satisfaction or
level of satisfaction, budget allocation, self-control, and overestimation. These factors include the
factor group of deposits cos
SCOPE FOR FUTURE WORK
Theoretical interest means this research uses several variables from behavioral finance, among
other mental accounting, regret aversion, loss aversion, self-control, anchoring, and overconfidence
and there are also fourteen factors included within to use in this research. For further researchers
who want to conduct a study on behavioral finance can use variables and factors included within.
Besides, the researchers also can find many more subjects with different company fields and use a
variable that differs from what is used in this research.

Theoretical interest means this

research uses several variables
from behavioral
finance, among other mental
accounting, regret aversion, loss
aversion, self-control,
anchoring and overconfidence
and there are also fourteen factors
included within to use in
this research.
For further researchers who want
to conduct a study on behavioral
finance can use
variables and factors included
within. Besides, the researchers
also can find much more
subject with different company
fields and use variables different
from what is used in this
research.
Russian Journal of Agricultural and Socio-Economic Sciences 74(2):115-124
DOI: 10.18551/rjoas.2018-02.13
 IMPACT OF BEHAVIORAL BIASES ON INVESTMENT
DECISIONS: A STUDY ON SELECTED RISK SEEKING
INVESTORS IN INDIA
Kumar Das Mohapatra
Sambalpur University
Anuradha Samael
Sambalpur University
OBJECTIVES
 To identify the presence of selected investor biases among risk-averse Indian Investors.
 To examine the role of demographic variables on behavioral biases. (age, gender,
income, education, profession, etc.
 To determine whether there exist any inter bias relationship among biases.
 To find out which bias is most pronounced among risk-averse Indian Investors

RESEARCH METHODOLOGY
This paper consists of around 10 prepositions based on assumptions regarding optimal product
decisions of both regret-neutral and regret-averse firm’s production. Also, a Binary model has been
formed based on prepositions.

RESEARCH TOOLS USED

The tools used were Descriptive Statistics, ANOVA, Binary Models to carry out the experiments
which help to make the hypothesis accepted.

CONCLUSION & FINDINGS

Behavioral finance plays a significant role in present-day economics as its usefulness is seen in the
fields of academics, advisor, policy design, investor education, and client relationship. Taking
irrational decisions becomes is very expensive for a middle class or low-income group people so it
is of utmost necessity that individuals take decisions very carefully. Hence before investing if the
organization takes time to understand and predict biases of clients based by allowing them to fill a
two-minute questionnaire on personality traits can to understand the client's perspective.
Governments should also learn about the behavioral patterns so that they can formulate effective
policies and can create better financial instruments, services, and education.
SCOPE FOR FUTURE WORK
There is a scope for research like in the production for firms to know about the revenue profits.
Also, the researchers can compare the optimal outputs for 2 different sectors or industries with the
same business.
International Journal of Commerce and Management Research
ISSN: 2455-1627; Impact Factor: RJIF 5.22
 International Journal of Advanced Science and Technology 29(6):2408-2425

REGRET AVERSION AND FALSE REFERENCE

POINTS IN RESIDENTIAL REAL ESTATE
Michael J. Seiler, Vicky L. Seiler, Stefan
Traub, and David M. Harrison

OBJECTIVES
This study empirically exams the combination of regret aversion and false reference points in a
residential real estate context. Survey respondents were put in a hypothetical situation, where they
had purchased an investment property several years ago. Hindsight knowledge about a foregone
all-time high was introduced. As hypothesized, respondents on average expressed higher regret if
they had actively failed to sell at the all-time high (commission scenario) than if they had simply
been unaware of the potential gain (omission scenario). Women were found to be more susceptible
to regret aversion and false reference points than men.

RESEARCH METHODOLOGY
As outlined above, regret aversion and false reference points should lead to higher experienced
regret if the perceived loss is caused by a commission instead of an omission. Hence, under the null
hypothesis, we do not expect hindsight knowledge to influence the size of decision regret. Let k, k
{O, C}, denote the respondent’s mean answer to the omission scenario and the commission
scenario, respectively. Formally, we have:

We will also investigate our hypothesis for different subgroups of the sample. Hence, we collected
the respondents’ gender, marital status, age, and country of origin. In the context of decision
making under risk and uncertainty, gender differences have been demonstrated by many authors
RESEARCH TOOLS USED
All data are collected from MBA students in a masters’ level required finance course at Hawaii
Pacific University each semester from the fall of 2004 through the spring of 2006. All 225 students
who took this course completed a survey that was handed out in class. The first part of the survey
collects demographic information. The 225 students come from 33 different countries on five
different continents. Because of the tremendous diversity in the student body, North America is the
origin of only 38% of the sample; Asia represents the same percentage, while Europe drops down
to 25.8%. Respondent ages range from 20 to 57 years old, with an average of 27.53 years. Men
compose 58.7% of the respondents. Finally, only 12.4% of the participants are married.
Regret aversion and false reference points are examined in Exhibit 1. Columns 3 and 4 give the
mean regret scores without (O) and with (C) knowledge. Standard errors are given in parentheses.
Case numbers can be taken from Column 2. In Column 5, we report the results of within-group
tests for regret aversion and false reference points. We apply one-tailed T-tests (for two related
samples).11 The first row gives the T-value while the second row shows the significance level of
the test p. Results that are significant at the 10% level (5% level) are marked with one (two)
asterisk(s). Column 6 states the results of the respective between-groups test. Here, we apply two-
tailed independent sample T-tests if there are only two subgroups (e.g., women vs. men), and
median-tests if there are more than two subgroups (e.g., the interaction between gender and marital
status). In the latter case, we report chi-squared-values (of the parametric approximation of the
exact median test) instead of T-values.

CONCLUSION & FINDINGS

This study examines the combination of regret aversion and false reference point bias (people’s
tendency to base their judgments on prominent, but wrong reference points and to perceive harmful
commissions as worse than corresponding omissions) in real estate decision making. Specifically,
regret aversion and false reference points are tested in a hypothetical real estate investment setup
with an induced false reference point. While the majority of subjects do not exhibit the bias (the
median regret difference is zero for the overall data set and all subsamples), a large minority of
respondents perceive losses that are due to a commission as more severe than losses that are due to
an omission. Regret aversion turns out to be most widespread and strongest for single women.
Furthermore, the bias is insignificant for the European sub-sample.
SCOPE FOR FUTURE WORK
1). Future studies should attempt to identify the underlying causes of each.

2). Follow-up examinations should continue to incorporate the demographics collected here and
should consider issues such as whether or not residential real estate is a primary residence or an
investment property
3). Moreover, it seems to be worthwhile to collect field data to investigate whether or not these
biases have a real impact on real estate markets.

Michael J. Seiler, Old Dominion University, Norfolk, VA 23539 or [email protected]. Vicky L. Seiler, Johns Hopkins
University, Washington, DC 21201 or [email protected]. Stefan Traub, Universität Bremen, Bremen, Germany, or
[email protected]. David M. Harrison, Texas Tech University, Lubbock, TX 79409-2101 or David.
[email protected].

DO INVESTORS REGRET?
Mrs. A. Sumer* Research Scholar, Dept of Management Studies, SV University, Tirupati
*Corresponding Author
M. Srinivasa Reddy Professor, Department of Management Studies, SV University Tirupati.

OBJECTIVES
 To find out the existence of regret behavior among retail investors.
 To identify factors for regrets in investments.
 To check whether regret behavior leads to herding or not.
RESEARCH METHODOLOGY
For the present study, investors of only Tirupati urban area in Chittoor district are considered. The
sample size considered for the study is 80, effectively only 72 samples were found complete and
satisfying. Sampling is done using a convenience sampling technique.

RESEARCH TOOLS USED

The Pearson Chi-square and Likelihood ratios were used to carry out the results.

CONCLUSION & FINDINGS

Regret aversion is a bias that is invariably found in investors; however, younger investors are more
susceptible to this bias. Empirical evidence of this study shows that investors are either
experiencing regret aversion or lurking in the dilemma whether it is regret or not. The brokerage
firms and investment advisors need to be conscious about the fact that investors may make sub-
optimal decisions or they may not heed the advice owing to regret-averse behavior. The study
provides evidence that regret aversion and herding are related and investors might become more
likely to follow the herd rather than take calculated risks to optimize their portfolio returns. A
comprehensive study can be conducted to explore the relationships among various biases and
specifically with regret aversion bias.

SCOPE FOR FUTURE WORK

In addition to the research, there is a wide scope for more studies viz., analysis of variance in
regrets among different groups of investors and studies against different demographic factors, etc.,

International Journal of Recent Technology and Engineering (IJRTE)

ISSN: 2277-3878, Volume-8 Issue-6, March 2020

REGRET AVERSION AND DECISION PERSON AND DECISION

PROCESS QUALITY: PROCESS QUALITY: EFFECT OF
REGRET OF REGRET
SALIENCE ON DECISION PROCESS CAREFULNESS
Jochen Reb
Singapore Management University, [email protected]
OBJECTIVES
  We examined the effect of regret aversion on decision process quality by manipulating
whether the possibility of experiencing regret as a result of their decision was made salient
to participants or not
 predicted that when the possibility of experiencing regret is highly salient and regret
aversion and anticipatory regret, therefore, are increased, decision-makers will engage in a
more careful decision process as compared to when the regret is less salient
RESEARCH METHODOLOGY
Participants had to choose among four hypothetical options with risky monetary outcomes and
positive expected values. Each option had two possible outcomes, one positive and one negative.
Before participants were presented with the options, we manipulated regret salience between-
subjects by varying outcome feedback expectations across two levels. In the Control condition,
decision-makers expected to receive outcome feedback only for their chosen option. In the Regret
condition, they expected outcome feedback for all options. This manipulation has been
successfully used in the past (Eilenberg et al, 1996; Eilenberg & Beattie, 1997). When decision-
makers receive full feedback, they find out if they would have achieved a better outcome had they
chosen a different option, which would make them feel regret. Decision-makers are aware of this
and tend to prefer options that protect them from such feedback, indicating regret aversion.
The four options had possible outcomes ranging from -20 to 40, probabilities of receiving a
positive outcome ranging from 50% to 80%, and expected values ranging from 4 to 10. The
options were constructed such that the possible loss was constant (-20), but the probabilities
increased steadily from a 20% chance to a 50% chance of receiving this negative outcome. At the
same time, options with a higher chance of receiving the negative outcome provided bigger wins
and higher expected values. Because of these advantages and disadvantages of the options, there
was a need to carefully examine the available alternatives to identify the preferred one
RESEARCH TOOLS USED
A questionnaire was given to each participant with highlighted quality and control and
uncontrolled subgroups were divided using this questionnaire and conditions were different.
Depending, on which the individual teamed up.

CONCLUSION & FINDINGS

On average, participants took about 151 seconds (SD = 52.32) to reach a decision and searched
about 75 pieces of information (SD = 36.13). These results suggest that participants took the task
seriously, even though no incentives contingent on choice outcomes were offered.
These findings are interesting because decision-makers in the Regret condition were also less likely
to end up choosing the two high-risk options. Thus, it appears that while the concern about future
regret led decision-makers in the Regret condition to spend more time deliberating about the
decision overall, they spent less time on average on pieces of information about the riskier options.
Subsequently, they also ended up choosing the riskier option less frequently
SCOPE FOR FUTURE WORK
1). Further, future research should examine decision contexts in which exhaustive information
search and careful deliberation would be considered less justifiable and, therefore, more
regrettable.
2). Detailed data can be collected by segregating persons based on different demographic factors.
3). The research can be further analyzed by dividing different sections of society into quadrants.