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The disposition effect, performance, stop loss orders and education

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  • Talpsepp, Tõnn
  • Vaarmets, Tarvo

Abstract

The paper studies how simulated stop loss orders affect the disposition effect and performance by running simulations using a complete transaction dataset from Nasdaq Tallinn which includes all investors in the market. We combine transaction data with detailed educational registry data about individual investors. We show that stop loss orders reduce the disposition effect but only to a certain extent, and they can be harmful to performance at the same time. We study how educational factors moderate the association of performance and the disposition effect, with mixed results.

Suggested Citation

  • Talpsepp, Tõnn & Vaarmets, Tarvo, 2019. "The disposition effect, performance, stop loss orders and education," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    • Handle: RePEc:eee:beexfi:v:24:y:2019:i:c:s2214635019300863
    DOI: 10.1016/j.jbef.2019.100240
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    Cited by:

    1. Ahn, Yongkil, 2024. "Optimal stopping decisions and the disposition effect," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    2. Juan Carlos Matallín‐Sáez & Amparo Soler‐Domínguez & Salvador Navarro‐Montoliu & Diego Víctor de Mingo‐López, 2022. "Investor behavior and the demand for conventional and socially responsible mutual funds," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(1), pages 46-59, January.
    3. Dalla Costa, Aldo Fortunato & Mollica, Vito & Singh, Abhay, 2021. "Payment methods and the disposition effect: Evidence from Indonesian mutual fund trading," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    4. Talpsepp, Tõnn & Liivamägi, Kristjan & Vaarmets, Tarvo, 2020. "Academic abilities, education and performance in the stock market," Journal of Banking & Finance, Elsevier, vol. 117(C).

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    More about this item

    Keywords

    Disposition effect; Performance; Stop loss orders; Education; Mental abilities;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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