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Emotion, Investor Behavior, and Market Turbulence: an Analyais Based on Regret Theory

Research Project

Project/Area Number 25590069
Research Category

Grant-in-Aid for Challenging Exploratory Research

Allocation TypeMulti-year Fund
Research Field Money/ Finance
Research InstitutionRitsumeikan University

Principal Investigator

QIN Jie  立命館大学, 経済学部, 教授 (40329751)

Project Period (FY) 2013-04-01 – 2016-03-31
Project Status Completed (Fiscal Year 2015)
Budget Amount *help
¥3,510,000 (Direct Cost: ¥2,700,000、Indirect Cost: ¥810,000)
Fiscal Year 2015: ¥1,430,000 (Direct Cost: ¥1,100,000、Indirect Cost: ¥330,000)
Fiscal Year 2014: ¥910,000 (Direct Cost: ¥700,000、Indirect Cost: ¥210,000)
Fiscal Year 2013: ¥1,170,000 (Direct Cost: ¥900,000、Indirect Cost: ¥270,000)
Keywords後悔 / Regret of inaction / 後悔理論 / バブル / 金融危機 / Herd / 感情 / 神経経済学 / 後悔回避 / 市場参加 / 注文量 / Order imbalance / 市場暴落 / 感情と投資 / クラッシュ
Outline of Final Research Achievements

The financial crisis of 2007-2008 demonstrated the importance to include emotion in finance theory. This research focuses on regret. Regret has important effects on investment. For example, if stock prices keep rising, investors who regret the missed opportunity of buying stocks at lower prices may try to correct their mistakes by trading aggressively. This will lead to higher prices and triger a bubble. Even Harry Markowitz, a winner of Nobel Prize in economics, said that he split his pension contributions 50/50 between bonds and equities to minimize future regret. This research constructs a theoretical model of regret and investment. A distinctive feature of this model is that it not only includes “regret over action”, the regret of a bad investment, but also incorporates “regret over inaction”, the regret of a missed opportunity. This model illustrates how regret can affect investor behavior. It also provides theoretical explanations to bubbles, crashes, and other phenomena.

Report

(4 results)
  • 2015 Annual Research Report   Final Research Report ( PDF )
  • 2014 Research-status Report
  • 2013 Research-status Report
  • Research Products

    (7 results)

All 2016 2015 2014 Other

All Journal Article (1 results) (of which Peer Reviewed: 1 results,  Acknowledgement Compliant: 1 results) Presentation (6 results) (of which Int'l Joint Research: 1 results)

  • [Journal Article] A model of regret, investor behavior, and market turbulence2015

    • Author(s)
      Jie Qin
    • Journal Title

      Journal of Economic Theory

      Volume: 160 Pages: 159-174

    • DOI

      10.1016/j.jet.2015.08.010

    • Related Report
      2015 Annual Research Report
    • Peer Reviewed / Acknowledgement Compliant
  • [Presentation] High Frequency Data, Neuroeconomics, Behavioral Finance, and Other New Approaches in Economics2016

    • Author(s)
      Jie Qin
    • Organizer
      Data Science Workshop, Fred Hutchinson Cancer Research Center, University of Washington
    • Place of Presentation
      University of Washington, USA
    • Year and Date
      2016-01-26
    • Related Report
      2015 Annual Research Report
    • Int'l Joint Research
  • [Presentation] Emotion and Market: A Model of Anticipated Regret, Investor Behavior and Market Turbulence2014

    • Author(s)
      秦劼
    • Organizer
      The 9th International Conference on the “Regional Innovation and Cooperation in Asia”
    • Place of Presentation
      立命館大学(滋賀県)
    • Year and Date
      2014-11-22
    • Related Report
      2014 Research-status Report
  • [Presentation] Emotion and Market: A Model of Anticipated Regret, Investor Behavior and Market Turbulence2014

    • Author(s)
      秦劼
    • Organizer
      慶応大学Public Economics Seminar
    • Place of Presentation
      慶応大学(東京都)
    • Year and Date
      2014-11-07
    • Related Report
      2014 Research-status Report
  • [Presentation] Emotion and Market: A Model of Anticipated Regret, Investor Behavior and Market Turbulence2014

    • Author(s)
      秦劼
    • Organizer
      立命館大学経済学会セミナー
    • Place of Presentation
      立命館大学(滋賀県)
    • Year and Date
      2014-04-15
    • Related Report
      2014 Research-status Report
  • [Presentation] Emotion and Market: A Model of Anticipated Regret, Investor Behavior and Market Turbulence

    • Author(s)
      秦劼
    • Organizer
      Seminar at Foster Business School, University of Washington
    • Place of Presentation
      Seattle, USA
    • Related Report
      2013 Research-status Report
  • [Presentation] Emotion and Market: A Model of Anticipated Regret, Investor Behavior and Market Turbulence

    • Author(s)
      秦劼
    • Organizer
      Seminar of Finance at Shanghai University of Finance and Economics
    • Place of Presentation
      Shanghai,China
    • Related Report
      2013 Research-status Report

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Published: 2014-07-25   Modified: 2019-07-29  

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