The Effect of Prior Investment Outcomes on Future Investment Decisions: Is There a Gender Difference?

Prior perceived losses and investment objectives after stock market crisis: a moderated-mediation model of risk tolerance and loss aversion

“…The definition of variables with references, mean, standard deviation, item loadings, and Cronbach’s alpha is reported in Table 1 . Prior perceived losses, loss aversion, risk tolerance, and investment objectives are adapted from existing studies (Hibbert et al 2018 ; Beckmann and Menkhoff 2008 ; Hoffmann et al 2013 ; Hoffmann and Shefrin 2014 ). The sample of the survey questionnaire is reported in appendix.…”

“…dev Items loading Cron. alpha Prior perceived losses The following question is asked (Hibbert et al 2018 ) My investment performance for the last three months was as follows: On average, I have experienced losses on my investments On average, my gains are just about as much as my losses On average, I have experienced gains on my investments A dummy variable assigns 1 if respondents select ‘On average, I have experienced a loss on my investments’ else 0 0.59 0.49 – – Loss aversion Modified from Beckmann and Menkhoff ( 2008 ) To what extent respondents agree/disagree with the following items: 3.64 0.68 – 0.729 LA1 In case of loss position, I generally wait for a price rebound instead of selling those shares 3.45 1.02 0.776 LA2 In case of gain position, I generally prefer to sell those shares instead of waiting 3.65 0.96 0.760 LA3 I am not willing to sell shares that decreased in value 3.53 0.97 0.769 LA4 I am willing to sell shares that have increased in value 3.93 0.70 0.658 Responses are recorded on a scale from 1 (strongly disagree) to 5 (strongly agree) Risk tolerance Modified from Hoffmann et al ( 2013 ) To what extent respondents agree/disagree with the following items: 3.28 0.81 –...…”

“…The coexistence of both loss aversion and house money effect is shown in China, where individual investors tend to increase risk-taking in response to prior losses and concurrently decrease risk-taking in response to prior losses (Duxbury et al 2015 ). When retail investors’ reactions to prior gains and losses are investigated, men are more likely than women to continue investing after incurring losses (Hibbert et al 2018 ), whereas prior gains explain investors’ risky asset holdings (Massa and Simonov 2005 ) and preferences for stocks with higher beta and idiosyncratic risk (Duxbury et al 2013 ). Duxbury et al ( 2013 ) further show that prior realized outcomes, be it prior losses or gains, persuade investors to update their beliefs about the distribution of future asset returns and alter their portfolio composition.…”

“…Investors who have experienced losses in the past would be more averse to losses due to the larger impact of losses (Tversky and Kahneman 1991 ). Hibbert et al ( 2018 ) show that prior losses increase negative expectations toward market conditions. Similarly, prior perceived losses may increase investors’ loss aversion.…”

A Study on Social Media Opinion About Women Investors

“…Most commonly bad decision that led to lose money, impacts investor negatively, because decision that was made will associate with negative experience when investor lost his investment (Zhou & Buongiono, 2019). Men and women react to prior losses differently: men are willing to continue invest, but majority of women tend to discontinue investing or expect losses in the future (Hibbert et al, 2018), because prior losses or gains impact future decision making (Thaler & Johnson, 1990). Additionally, bad investment decision associates with stress (Steve, 2020) and mood (Gul & Khan, 2019).…”