This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Disposition Effect and Momentum

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Bing NMI1 Han () (Department of Finance)
Mark Grinblatt () (Finance Area)

Additional information is available for the following registered author(s):

Abstract

The tendency of some investors to hold on to their losing stocks creates a spread between a stock's fundamental value and its equilibrium price, as well as price underreaction to information. Spread convergence, arising from the random evolution of fundamental values and updating of reference prices, generates predictable equilibrium prices that will be interpreted as possessing momentum. Cross-sectional empirical tests are consistent with the model. A variable proxying for aggregate unrealized capital gains appears to be the key variable that generates the profitability of a momentum strategy. Past one-year returns have no predictability for the cross-section of returns once this variable is controlled for.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=288466
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm239.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 09 Nov 2001
Date of revision:
Handle: RePEc:ysm:somwrk:ysm239

Contact details of provider:
Web page: http://mba.yale.edu/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Nicholas Barberis, 2001. "Mental Accounting, Loss Aversion, and Individual Stock Returns," Journal of Finance, American Finance Association, vol. 56(4), pages 1247-1292, 08. [Downloadable!] (restricted)
  2. Mark Grinblatt, 2001. "What Makes Investors Trade?," Journal of Finance, American Finance Association, vol. 56(2), pages 589-616, 04. [Downloadable!] (restricted)
    Other versions:
  3. K. Geert Rouwenhorst, 1998. "International Momentum Strategies," Journal of Finance, American Finance Association, vol. 53(1), pages 267-284, 02. [Downloadable!] (restricted)
    Other versions:
  4. Ferris, Stephen P & Haugen, Robert A & Makhija, Anil K, 1988. " Predicting Contemporary Volume with Historic Volume at Differential Price Levels: Evidence Supporting the Disposition Effect," Journal of Finance, American Finance Association, vol. 43(3), pages 677-97, July. [Downloadable!] (restricted)
  5. Conrad, Jennifer & Kaul, Gautam, 1998. "An Anatomy of Trading Strategies," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 11(3), pages 489-519.
  6. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October. [Downloadable!] (restricted)
  7. De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-95, June. [Downloadable!] (restricted)
    Other versions:
  8. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-38, August. [Downloadable!] (restricted)
    Other versions:
  9. Shapira, Zur & Venezia, Itzhak, 2001. "Patterns of behavior of professionally managed and independent investors," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1573-1587, August. [Downloadable!] (restricted)
  10. Jegadeesh, Narasimhan, 1990. " Evidence of Predictable Behavior of Security Returns," Journal of Finance, American Finance Association, vol. 45(3), pages 881-98, July. [Downloadable!] (restricted)
  11. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, 08. [Downloadable!] (restricted)
    Other versions:
  12. Robert J. Shiller & Karl E. Case, 1988. "The Behavior of Home Buyers in Boom and Post-Boom Markets," Cowles Foundation Discussion Papers 890, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  13. Chan, Louis K C & Jegadeesh, Narasimhan & Lakonishok, Josef, 1996. " Momentum Strategies," Journal of Finance, American Finance Association, vol. 51(5), pages 1681-1713, December. [Downloadable!] (restricted)
  14. 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 777-90, July. [Downloadable!] (restricted)
  15. David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," NBER Working Papers 8143, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  16. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-36, May-June. [Downloadable!] (restricted)
  17. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  18. Weber, Martin & Camerer, Colin F., 1998. "The disposition effect in securities trading: an experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 33(2), pages 167-184, January. [Downloadable!] (restricted)
  19. Andrew W. Lo & Jiang W. Wang, 2000. "Trading Volume: Definitions, Data Analysis, and Implications of Portfolio Theory," NBER Working Papers 7625, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  20. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December. [Downloadable!] (restricted)
  21. Nicholas Barberis & Ming Huang, 2001. "Mental Accounting, Loss Aversion, and Individual Stock Returns," NBER Working Papers 8190, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  22. Simon Gervais, 2001. "The High-Volume Return Premium," Journal of Finance, American Finance Association, vol. 56(3), pages 877-919, 06. [Downloadable!] (restricted)
    Other versions:
  23. Andrew Ang & Geert Bekaert & Jun Liu, 2000. "Why Stocks May Disappoint," NBER Working Papers 7783, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  24. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June. [Downloadable!] (restricted)
    Other versions:
  25. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. " Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March. [Downloadable!] (restricted)
  26. A. Berkelaar & R. Kouwenberg, 2000. "Optimal portfolio choice under loss aversion," Econometric Institute Report 187, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
    Other versions:
  27. Tobias J. Moskowitz & Mark Grinblatt, 1999. "Do Industries Explain Momentum?," Journal of Finance, American Finance Association, vol. 54(4), pages 1249-1290, 08. [Downloadable!] (restricted)
    Other versions:
  28. Chip Heath & Steven Huddart & Mark Lang, 1999. "Psychological Factors And Stock Option Exercise," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 601-627, May. [Downloadable!] (restricted)
  29. Nicholas Barberis & Ming Huang & Tano Santos, 2001. "Prospect Theory And Asset Prices," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 1-53, February. [Downloadable!] (restricted)
  30. Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March. [Downloadable!] (restricted)
  31. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment1," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mao-Wei Hung & Hsiao-Yuan Yu, 2006. "A heterogeneous model of disposition effect," Applied Economics, Taylor and Francis Journals, vol. 38(18), pages 2147-2157, October. [Downloadable!] (restricted)
  2. Robert J. Shiller, 2002. "From Efficient Market Theory to Behavioral Finance," Cowles Foundation Discussion Papers 1385, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  3. Glaser, Markus & Weber, Martin, 2002. "Momentum and Turnover: Evidence from the German Stock Market," CEPR Discussion Papers 3353, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Newton, Da Costa Jr & Carlos, Mineto & Sergio, Da Silva, 2006. "Disposition effect and gender," MPRA Paper 1848, University Library of Munich, Germany. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to register as authors.

This page was last updated on 2008-8-11.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.