期刊
JOURNAL OF BANKING & FINANCE
卷 114, 期 -, 页码 -出版社
ELSEVIER
DOI: 10.1016/j.jbankfin.2020.105784
关键词
Regret aversion; Anticipated regret; Regret theory; Regret beta; Counterfactual thinking; Emotion
资金
- Nomura Foundation for Banking and Finance Frontier Research
- Zengin Foundation for Studies on Economics and Finance
- JSPS KAKENHI [JP16K03758]
This study examines the influence of regret aversion on asset pricing by proposing a regret-based capital asset pricing model in which individuals maximize the expected returns from chosen portfolios of assets while minimizing anticipated regrets. In equilibrium, a closed-form pricing formula is derived, whereby a risky asset's excess return is proportional to its regret beta that measures the exposure to investors' emotions. The market as a whole pays investors a positive regret premium as compensation for regret aversion. As such, this study proposes a conceptual framework to understand the aggregate effects of regret. The model indicates that employing a regret-related beta can help explain cross-sectional returns. It also implies that regret aversion is a possible reason for the flat security market line and high equity premium. (C) 2020 Elsevier B.V. All rights reserved.
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