Disposition Effect and Loss Aversion: An Analysis Based on a Simulated Experimental Stock Market
We experimentally investigate the existence of and possible origin of the disposition effect. Our approach has three distinct characteristics: Firstly, we created an experimental environment that closely mimics a real stock market and were thus able to obtain and analyze trading behavior data that accurately depicts actual individual investor trading behavior. Secondly, based on a questionnaire survey we conducted during the experiment, we were able to pinpoint each individual participant fs reference point. This, in effect, allowed us to verify an independent hypothesis of the existence of the disposition effect. such an approach differs from the extant literature, where only a joint hypothesis has been examined so far. Thirdly, we measured individual loss aversion coefficients and directly tested whether loss aversion is a cause of the disposition effect. Our results indicate both the existence of the disposition effect as well as prospect theory fs loss aversion being one of its sources.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Feb 2013|
|Contact details of provider:|| Web page: http://www2.econ.osaka-u.ac.jp/library/global/e_HP/e_g_shiryo.html|
More information through EDIRC
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.:
- 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.
- Constantinides, George M., 1984.
"Optimal stock trading with personal taxes : Implications for prices and the abnormal January returns,"
Journal of Financial Economics,
Elsevier, vol. 13(1), pages 65-89, March.
- George M. Constantinides, 1983. "Optimal Stock Trading with Personal Taxes: Implications for Prices and the Abnormal January Returns," NBER Working Papers 1176, National Bureau of Economic Research, Inc.
- Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
- Lakonishok, Josef & Smidt, Seymour, 1986. " Volume for Winners and Losers: Taxation and Other Motives for Stock Trading," Journal of Finance, American Finance Association, vol. 41(4), pages 951-974, September.
- Erich Kirchler & Boris Maciejovsky & Martin Weber, 2010.
"Framing Effects, Selective Information and Market Behavior: An Experimental Analysis,"
in: Handbook of Behavioral Finance, chapter 1
Edward Elgar Publishing.
- Erich Kirchler & Boris Maciejovsky & Martin Weber, 2004. "Framing Effects, Selective Information and Market Behavior An Experimental Analysis ," Papers on Strategic Interaction 2004-16, Max Planck Institute of Economics, Strategic Interaction Group.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-291, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Nicholas Barberis & Wei Xiong, 2006.
"What Drives the Disposition Effect? An Analysis of a Long-Standing Preference-Based Explanation,"
NBER Working Papers
12397, National Bureau of Economic Research, Inc.
- Nicholas Barberis & Wei Xiong, 2009. "What Drives the Disposition Effect? An Analysis of a Long-Standing Preference-Based Explanation," Journal of Finance, American Finance Association, vol. 64(2), pages 751-784, 04.
- Kaustia, Markku, 2010. "Prospect Theory and the Disposition Effect," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(03), pages 791-812, June.
- 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.
- Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
- Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
- Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December.
When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:1302. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Atsuko SUZUKI)
If references are entirely missing, you can add them using this form.