Stocks repurchase and sophistication of individual investors

In this article, we stress the impact of sophistication on stocks repurchase behavior by individual investors. By analyzing a large database of 8’072’016 trades by 84’500 individual French investors from 1999 to 2006, we evidence at aggregated and individual level that investors prefer to repurchase stocks they previously sold for a gain and stocks that have lost value since being sold. These patterns of repurchase emphasize the role played by anticipated and experienced regret in trading decisions. Based on direct measures of sophistication (trading of foreign assets, derivative assets and bonds) and an indirect one (wealth), we demonstrate that less sophisticated investors are more prone to these biases in repurchase behavior. Besides, we show that portfolio performance of investors are not directly related to these repurchase preferences.