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The anatomy of the disposition effect: Which factors are most important?

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  • Ahn, Yongkil

Abstract

This study analyzes the complete trading records, as well as the detailed individual-level survey responses of 76,172 retail investors to examine the relative importance of many factors that are associated with the disposition effect, which involves the tendency to take gains too early while holding on to losses. Feature selection techniques unveil that gender, loss aversion, and investor sophistication are the keys to grasping the disposition effect.

Suggested Citation

  • Ahn, Yongkil, 2022. "The anatomy of the disposition effect: Which factors are most important?," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001215
    DOI: 10.1016/j.frl.2021.102040
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    Cited by:

    1. Abudy, Menachem (Meni) & Gildin, Ilan & Mugerman, Yevgeny, 2024. "Don't move my cheese: Financial advice adaptation to regulatory change," Finance Research Letters, Elsevier, vol. 61(C).
    2. Ahn, Yongkil, 2024. "Optimal stopping decisions and the disposition effect," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    3. Huang, Lingxi & Guenther, Benno, 2024. "Information and context matter: debiasing the disposition effect with lasting impact," LSE Research Online Documents on Economics 122579, London School of Economics and Political Science, LSE Library.
    4. Ahn, Jungkyu & Ahn, Yongkil, 2023. "Clogged pipes in the repo market," Finance Research Letters, Elsevier, vol. 57(C).
    5. Muhammad Enamul Haque & Mahmood Osman Imam, 2024. "Does the Bangladesh Equity Market Expose to Disposition Effects Bias under Different Market Conditions?," IJFS, MDPI, vol. 12(3), pages 1-17, July.

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    More about this item

    Keywords

    Disposition effects; Feature selection; Machine learning;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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