Regret, Disgust and Disposition Effect: In-depth Analysis of Investor Behavior and Coping Strategies

This paper systematically reviews the theoretical framework and empirical research progress of regret aversion and the disposition effect in behavioral finance. By integrating Odean’s trading data of US retail investors, Locke & Mann’s research on the foreign exchange market, and Chen et al.’s analysis of emerging markets in Asia, it summarizes the cross-market performance differences of the disposition effect and its correlation mechanism with regret aversion psychology. Existing studies show that: (1) The disposition effect is universal in global financial markets, but its intensity is affected by market structure, investor composition, and professional level; (2) Regret aversion, as a core psychological mechanism, can be effectively identified through behavioral indicators such as asymmetry in holding time and frequency of stop-loss strategy use. This paper provides a systematic theoretical perspective for understanding investors’ irrational decisions, offers suggestions for future research directions, and recommendations were made for individual investors, professional traders and regulatory agencies.