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Disposition effect, investor sophistication and taxes: Some French Specificities

Author

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  • Shaneera Boolell-Gunesh
  • Marie-Hélène Broihanne
  • Maxime Merli

Abstract

We investigate the presence of the disposition effect for 90 244 individual investors using a unique large brokerage account database between 1999 and 2006. Our main results show that individual investors demonstrate a strong preference for realizing their winning stocks rather than their losing ones. However, the fiscal impact in France appears to be moderate relative to the one observed in other countries. Taking French specificities such as, the way short sales are realized and the existence of tax free account (PEA account) into account, show that: a) the behavioral bias is not eliminated for sophisticated individual investors; b) the change of ?tax account type? does not imply any change in investors? behavior.

Suggested Citation

  • Shaneera Boolell-Gunesh & Marie-Hélène Broihanne & Maxime Merli, 2009. "Disposition effect, investor sophistication and taxes: Some French Specificities," Finance, Presses universitaires de Grenoble, vol. 30(1), pages 51-78.
    • Handle: RePEc:cai:finpug:fina_301_0051
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    Citations

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    Cited by:

    1. Patrick Roger, 2012. "Portfolio diversification dynamics of individual investors: a new measure of investor sentiment," Working Papers of LaRGE Research Center 2012-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    2. Marco Pleßner, 2017. "The disposition effect: a survey," Management Review Quarterly, Springer, vol. 67(1), pages 1-30, February.
    3. Gemayel, Roland & Preda, Alex, 2018. "Does a scopic regime erode the disposition effect? Evidence from a social trading platform," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 175-190.
    4. Nicolas Aubert & Niaz Kammoun & Yacine Bekrar, 2018. "Financial decisions of the financially literate," Finance, Presses universitaires de Grenoble, vol. 39(2), pages 43-91.
    5. Camille Magron & Maxime Merli, 2012. "Stocks repurchase and sophistication of individual investors," Working Papers of LaRGE Research Center 2012-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    6. Bernard, Sabine & Loos, Benjamin & Weber, Martin, 2021. "The disposition effect in boom and bust markets," SAFE Working Paper Series 305, Leibniz Institute for Financial Research SAFE.
    7. Jean-Philippe Bouchaud & Damien Challet, 2016. "Why have asset price properties changed so little in 200 years," Papers 1605.00634, arXiv.org.
    8. Kahya, Evrim Hilal & Ekinci, Cumhur, 2022. "Disposition bias among Borsa Istanbul investors: What do we know about type, size and trading frequency?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).
    9. Daniel W. Richards & Janette Rutterford & Devendra Kodwani & Mark Fenton-O'Creevy, 2017. "Stock market investors' use of stop losses and the disposition effect," The European Journal of Finance, Taylor & Francis Journals, vol. 23(2), pages 130-152, January.
    10. Beatrice Boumda & Darren Duxbury & Cristina Ortiz & Luis Vicente, 2021. "Do Socially Responsible Investment Funds Sell Losses and Ride Gains? The Disposition Effect in SRI Funds," Sustainability, MDPI, vol. 13(15), pages 1-14, July.
    11. Richards, Daniel W. & Fenton-O'Creevy, Mark & Rutterford, Janette & Kodwani, Devendra G., 2018. "Is the disposition effect related to investors’ reliance on System 1 and System 2 processes or their strategy of emotion regulation?," Journal of Economic Psychology, Elsevier, vol. 66(C), pages 79-92.

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