Inaction inertia in the stock market

Orit Tykocinski, Roni Israel, Thane S. Pittman

Research output: Contribution to journalReview articlepeer-review

32 Scopus citations

Abstract

Based on the inaction inertia effect, it was hypothesized that investors who missed an opportunity to leave a "bear market" will be less likely to sell the stock at a later opportunity when facing a grave loss. Participants in a stock-market computer game were given an opportunity to sell their stock for a moderate gain. Having missed this initial opportunity and now facing a grave loss, these participants were less likely to sell their stock compared to participants whose potential loss was not as grave, or compared to participants facing the same magnitude of loss who had no previous opportunity to leave the market. Analysis of the time spent by participants on reading relevant information concerning the stock market suggests that this tendency toward continued inaction was not the result of careful deliberation over market trends. The results are discussed in terms of counterfactual thinking and anticipated regret.

Original languageEnglish
Pages (from-to)1166-1175
Number of pages10
JournalJournal of Applied Social Psychology
Volume34
Issue number6
DOIs
StatePublished - 1 Jan 2004

ASJC Scopus subject areas

  • Social Psychology

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