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Is the disposition effect in bonds as strong as in stocks? Evidence from an emerging market

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  • Hincapié-Salazar, Juliana
  • Agudelo, Diego A.

Abstract

Does the disposition effect appear in bond trades as in stocks? We apply Odean's measurement (1998) to a proprietary transaction database with unique investor IDs from an emerging market exchange that holds both stock and bond trading. We find some disposition effect in treasury bonds, but much lower than in stocks, and a positive relation between the two measures by investor. In addition, we find a significant disposition effect for local individuals and family offices, in both markets. In contrast, long-term institutions, brokerage firms, and foreign investors do not exhibit this bias. This is the first study to report evidence of the disposition effect in a fixed-income market.

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  • Hincapié-Salazar, Juliana & Agudelo, Diego A., 2020. "Is the disposition effect in bonds as strong as in stocks? Evidence from an emerging market," Global Finance Journal, Elsevier, vol. 46(C).
    • Handle: RePEc:eee:glofin:v:46:y:2020:i:c:s1044028319301632
    DOI: 10.1016/j.gfj.2019.100508
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    Cited by:

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    2. Giannikos, Christos I. & Kakolyris, Andreas & Suen, Tin Shan, 2023. "Prospect theory and a manager's decision to trade a blind principal bid basket," Global Finance Journal, Elsevier, vol. 55(C).
    3. Agudelo, Diego A. & Múnera, Daimer J., 2023. "Who are the vectors of contagion? Evidence from emerging markets," International Review of Financial Analysis, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Disposition effect; Behavioral finance; Foreign investors; Institutional investors; Individual investors; Colombian treasury bonds;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G40 - Financial Economics - - Behavioral Finance - - - General

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