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.