Asymmetric Updating of Reference Prices

Susan Jung Grant, University of Colorado, Boulder
Ying Xie, Washington University
Investors who track stock price fluctuations report feeling negatively about breaking even if their stock reaches a high point and then stabilizes to the level of the original investment. On the other hand, investors whose stock reaches a low point and then returns to the original level do not report feeling comparably positively. Although in both cases investors end up with equivalent portfolios, we observe significant differences in how investors assess their performance due to the asymmetric updating of reference prices. Our results indicate this is due to feeling ownership over a stock’s paper gains but not its paper losses.
[ to cite ]:
Susan Jung Grant and Ying Xie (2008) ,"Asymmetric Updating of Reference Prices", in NA - Advances in Consumer Research Volume 35, eds. Angela Y. Lee and Dilip Soman, Duluth, MN : Association for Consumer Research, Pages: 198-200.