What the study found
The study found that regret measures based on market capitalization, trading volume, and trading value all significantly predict future stock returns. Among these, market-capitalization-based regret showed the strongest explanatory power.
Why the authors say this matters
The authors conclude that regret in investors may be shaped not only by past returns but also by salient market features such as highly visible large-cap stocks. The findings indicate that this may have meaningful implications for behaviorally informed investment strategies.
What the researchers tested
The researchers examined whether investor regret can explain cross-sectional variation in asset returns. They created new regret measures based on market capitalization (SIZEREG), trading volume (VOREG), and trading value (VOPREG), alongside a conventional return-based measure (RETREG), and tested them using Fama-MacBeth regressions on KOSPI and KOSDAQ stocks from 1986 to 2024.
What worked and what didn't
All of the regret variables significantly predicted future returns. SIZEREG remained robust in multivariate regressions after controlling for firm characteristics and consistently outperformed RETREG; the predictive effect was stronger for small-cap, high-volatility, and low-price stocks in double-sorting portfolio analyses. The abstract does not report any regret measure that failed to predict returns.
What to keep in mind
The abstract says the results were supported by robustness tests across alternative definitions and industry conditions, but it does not provide detailed limitations. No additional caveats are described in the available summary.
Key points
- Regret variables based on market capitalization, trading volume, and trading value all significantly predicted future returns.
- Market-capitalization-based regret (SIZEREG) had the strongest explanatory power.
- SIZEREG remained robust after controlling for firm characteristics and outperformed the conventional return-based regret measure (RETREG).
- The predictive effect was stronger for small-cap, high-volatility, and low-price stocks.
- The study used Fama-MacBeth regressions on KOSPI and KOSDAQ stocks from 1986 to 2024.
Disclosure
- Research title:
- Market-capitalization regret variables predict future stock returns
- Authors:
- somyung kim, Kiyool Ohk
- Institutions:
- Pusan National University
- Publication date:
- 2026-02-26
- OpenAlex record:
- View
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