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Buying Winners while Holding on to Losers: an Experimental Study of Investors' Behavior

Author

Listed:
  • Yuri Khoroshilov

    (University of Ottawa)

  • Anna Dodonova

    (University of Ottawa)

Abstract

This paper presents the results of an experimental study aimed to understand how the past stock performance affects investor's desire to buy or sell the stock. It shows that people prefer to buy stocks that performed well in the past. However, when investors must sell one of the stocks they already own, their desire to have their funds invested into the past winner significantly diminishes, which may be due to their reluctance to realize their losses.

Suggested Citation

  • Yuri Khoroshilov & Anna Dodonova, 2007. "Buying Winners while Holding on to Losers: an Experimental Study of Investors' Behavior," Economics Bulletin, AccessEcon, vol. 7(8), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-07g10009
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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume7/EB-07G10009A.pdf
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    References listed on IDEAS

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    5. Shefrin, Hersh & Statman, Meir, 1985. "The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 777-790, July.
    6. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
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    Cited by:

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    Keywords

    experimental economics;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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