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The disposition effect and investor experience

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  • Da Costa, Newton
  • Goulart, Marco
  • Cupertino, Cesar
  • Macedo, Jurandir
  • Da Silva, Sergio

Abstract

We examine whether investing experience can dampen the disposition effect, that is, the fact that investors seem to hold on to their losing stocks to a greater extent than they hold on to their winning stocks. To do so, we devise a computer program that simulates the stock market. We use the program in an experiment with two groups of subjects, namely experienced investors and undergraduate students (the inexperienced investors). As a control procedure, we consider random trade decisions made by robot subjects. We find that though both human subjects show the disposition effect, the more experienced investors are less affected.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 5 ()
Pages: 1669-1675

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:5:p:1669-1675

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Disposition effect; Investor experience; Artificial stock market; Framed field experiment;

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  1. Klaus Abbink & Bettina Rockenbach, 2006. "Option pricing by students and professional traders: a behavioural investigation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(6), pages 497-510.
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  18. Locke, Peter R. & Mann, Steven C., 2005. "Professional trader discipline and trade disposition," Journal of Financial Economics, Elsevier, vol. 76(2), pages 401-444, May.
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Cited by:
  1. Croonenbroeck, Carsten & Matkovskyy, Roman, 2013. "Is the market held by institutional investors? The disposition effect revisited," Discussion Papers 338, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.

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