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The Academy of Financial Services 35th Annual Meeting

del 21 al 22 de September del 2021

Virtual

Buy and buy again: The impact of unique reference points on (re)purchase decisions

miércoles, el 22 de septiembre de 2021 a las 12:00–13:15 EDT add to calendar
Virtual
Keywords

purchases, representativeness; reference points, performance

Short Description

Research in behavioural finance has uncovered that investors engage emotionally when trading. We investigate how three psychological factors influence purchase and repurchase decisions: representativeness, the influence of prior gains, and reference points. Using trading data of 7 200 UK investors we find that purchase decisions are influenced by representative heuristic and repurchase decisions are influenced by both representative heuristic and prior profitability. Further survival analysis showed that investors use the prior selling price as a unique reference point. Investors are more likely to repurchase a stock when trading above its reference point, but more likely to initiate the repurchase when trading below. Investors are influenced by previous experience and engage learning behaviour when they seek to reinforce past success. As reference points are inferred but infrequently researched, this research adds to the literature and provides important and robust results for those engaging with financial planning clients.

Lead & Corresponding Author

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Dr. Gizelle D. Willows, University of Cape Town
Job Title

Associate Professor

Email Address

Additional Authors

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Dr. Daniel W. Richards, York University
Job Title

Assistant Professor

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