Analysis of Disposal Effect and Regret Aversion in Aviation Industry Investment in the Post-Pandemic EraA Case Study of American Airlines

In 2020, there was a unique financial problem for the aviation industry caused by the pandemic. Most companies have suffered from a shortage of cash flow, increasing debt, and a large drop in the market. As enter the post-pandemic era with aviation resuming operations with a small note of uncertainty due to our increasing operating costs and geopolitical tensions. The paper utilizes American Airlines (AAL) as a case to investigate the characteristics of the irrational investor decisions in the post-pandemic environment through a behavioral finance lens and the effect on stock price volatility. Collecting the latest financial and stock price data of AAL, and integrating two typical behavioral biases, disposition effect and regret aversion, for the empirical research, the result shows that investors will usually show psychological behavior such as selling profitable assets early, postponing the disposal of loss-making assets, and blindly pursuing the rising prices when facing a high-risk market. People's emotions are connected with the stock price change, which is two-way fed back, to create the volatility of the market. Investor sentiment is what makes AAL's stock price extremely hard to predict. The conclusions of this paper can not only show the mechanism of behavioral bias in extreme market, but also provide a reference for investors to make reasonable decision and for regulatory bodies to improve market stability policy.