Anchored to the purchase price

A number that sticks

Psychologists call it anchoring: the first number you see becomes a reference that everything else is compared with. For someone who owns a stock it is often the purchase price. Below it, selling feels like taking a loss; above it, like locking in a gain.

This often leads to selling winners too early and holding losers too long. In 1985 the economists Hersh Shefrin and Meir Statman named it the disposition effect.

How long the stocks stayed below an earlier high

Anyone who bought at a high had the purchase price above the market until the stock got back there. This is the share of days each company spent below an earlier high, and the longest wait from a high until the price was back at it:

The middle company spent 95% of its days below an earlier high. That does not mean it fell all the time. Most rose a lot, but a new high is a single day, and the days below it are many.

AMD waited longest, from Jun 21, 2000 to Jan 2, 2020, 19 and a half years.

The stock does not know what you paid

The question the purchase price hides is what the stock is worth to you today, at today's price. The answer is the same whether you paid more or less. Your average purchase price is worked out in the average cost calculator, and how deep the largest companies fell and how much it took to get back is in the lesson on how much you can lose.

More figures are on the page for AMD.