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Buying Winners while Holding on to Losers: an Experimental Study of Investors' Behavior

Author

Listed:
  • Yuri Khoroshilov

    (University of Ottawa)

  • Anna Dodonova

    (University of Ottawa)

Abstract

This paper presents the results of an experimental study aimed to understand how the past stock performance affects investor's desire to buy or sell the stock. It shows that people prefer to buy stocks that performed well in the past. However, when investors must sell one of the stocks they already own, their desire to have their funds invested into the past winner significantly diminishes, which may be due to their reluctance to realize their losses.

Suggested Citation

  • Yuri Khoroshilov & Anna Dodonova, 2007. "Buying Winners while Holding on to Losers: an Experimental Study of Investors' Behavior," Economics Bulletin, AccessEcon, vol. 7(8), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-07g10009
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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume7/EB-07G10009A.pdf
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    References listed on IDEAS

    as
    1. Ippolito, Richard A, 1992. "Consumer Reaction to Measures of Poor Quality: Evidence from the Mutual Fund Industry," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 45-70, April.
    2. Conrad, Jennifer & Kaul, Gautam, 1988. "Time-Variation in Expected Returns," The Journal of Business, University of Chicago Press, vol. 61(4), pages 409-425, October.
    3. Shiller, Robert J., 1999. "Human behavior and the efficiency of the financial system," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 20, pages 1305-1340, Elsevier.
    4. repec:bla:jfinan:v:53:y:1998:i:5:p:1589-1622 is not listed on IDEAS
    5. 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.
    6. repec:bla:jfinan:v:53:y:1998:i:5:p:1775-1798 is not listed on IDEAS
    7. Bange, Mary M., 2000. "Do the Portfolios of Small Investors Reflect Positive Feedback Trading?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(2), pages 239-255, June.
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    Cited by:

    1. Jørgen Vitting Andersen & Andrzej Nowak, 2020. "Symmetry and financial Markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-03048686, HAL.
    2. A. Sarath Babu, 2019. "Investors` attention and American depository receipts pricing: evidence from Indian stocks," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(12), pages 381-386, December.

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    More about this item

    Keywords

    experimental economics;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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