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Culture and the disposition effect

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  • Bastian Breitmayer
  • Tim Hasso
  • Matthias Pelster

Abstract

We study the relationship between national culture and the disposition effect by investigating international differences in the degree of investors' disposition effect. We utilize brokerage data of 387,993 traders from 83 countries and find great variation in the degree of the disposition effect across the world. We find that the cultural dimensions of long-term orientation and indulgence help to explain why certain nationalities are more prone to the disposition effect. We also find support on an international level for the role of age and gender in explaining the disposition effect.

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  • Bastian Breitmayer & Tim Hasso & Matthias Pelster, 2019. "Culture and the disposition effect," Papers 1908.11492, arXiv.org.
    • Handle: RePEc:arx:papers:1908.11492
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    References listed on IDEAS

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    1. Ravi Dhar & Ning Zhu, 2006. "Up Close and Personal: Investor Sophistication and the Disposition Effect," Management Science, INFORMS, vol. 52(5), pages 726-740, May.
    2. 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.
    3. Rau, Holger A., 2014. "The disposition effect and loss aversion: Do gender differences matter?," Economics Letters, Elsevier, vol. 123(1), pages 33-36.
    4. 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:

    1. Hasan, Iftekhar & Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2023. "Cultural values of parent bank board members and lending by foreign subsidiaries: The moderating role of personal traits," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    2. Alexia Gaudeul & Caterina Giannetti, 2021. "Fostering the adoption of robo-advisors: A 3-weeks online stock-trading experiment," Discussion Papers 2021/275, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2022. "Foreign bank lending: The role of home country culture during prosperous and crisis periods," Journal of Multinational Financial Management, Elsevier, vol. 66(C).
    4. Liêu, L.M. & Pelster, M., 2020. "Framing and the disposition effect in a scopic regime," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 175-185.
    5. Zhang, Xiaotao & Wang, Ziqiao & Hao, Jing & Liu, Jiubiao, 2022. "Stock market entry timing and retail investors' disposition effect," International Review of Financial Analysis, Elsevier, vol. 82(C).
    6. Gutiérrez-Nieto, Begoña & Ortiz, Cristina & Vicente, Luis, 2023. "A bibliometric analysis of the disposition effect: Origins and future research avenues," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    7. Alexia GAUDEUL & Caterina GIANNETTI, 2023. "Trade-offs in the design of financial algorithms," Discussion Papers 2023/288, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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