Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7364696 | Journal of International Financial Markets, Institutions and Money | 2015 | 14 Pages |
Abstract
This paper uses investor-level data to examine jointly the tendency of investors to succumb to the disposition effect and the house money effect; two behavioral biases premised on seemingly contradictory responses to prior gains/losses. We document three novel findings. First, the two effects can contemporaneously coexist in a single stock market and the majority of investors (53.5%) simultaneously succumb to both effects. Second, we demonstrate the importance of distinguishing prior outcomes across two dimensions; unrealized/realized and stock/portfolio level. Third, we find that the house money effect moderates the disposition effect, suggesting that cognitive biases need not always have negative consequences.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Darren Duxbury, Robert Hudson, Kevin Keasey, Zhishu Yang, Songyao Yao,