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Buy, sell, or hold? A sense-making account of factors influencing trading decisions

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  • Daphne Sobolev
  • Bryan Chan
  • Nigel Harvey

Abstract

We investigated the effects of news valence, the direction of trends in graphically presented price series, and the culture and personality of traders in a financial trading task. Participants were given 12 virtual shares of financial assets and asked to use price graphs and news items to maximize their returns by buying, selling, or holding each one. In making their decisions, they were influenced by properties of both news items and price series but they relied more on the former. Western participants had lower trading latencies and lower return dispersions than Eastern participants. Those with greater openness to experience had lower trading latencies. Participants bought more shares when they forecast that prices would rise but failed to sell more when they forecast that they would fall. These findings are all consistent with the view that people trading assets try to make sense of information by incorporating it within a coherent narrative.

Suggested Citation

  • Daphne Sobolev & Bryan Chan & Nigel Harvey, 2017. "Buy, sell, or hold? A sense-making account of factors influencing trading decisions," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1295618-129, January.
    • Handle: RePEc:taf:oaefxx:v:5:y:2017:i:1:p:1295618
    DOI: 10.1080/23322039.2017.1295618
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    References listed on IDEAS

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