When the disposition effect proves to be rational: Experimental evidence from professional traders

ABSTRACT: The disposition effect is a behavioural finance anomaly that has been observed in many populations including non-professional investors as well as professional investors and has been linked to reduced trading performance. However, the majority of studies to date have looked at the disposition effect in the context of non-mean reverting markets. We conducted a within-subject experiment with n = 193 professional traders, to examine how the tendency towards the disposition effect varies across decision-making for mean reverting securities and non-mean reverting securities. In addition, we consider whether a simple informational intervention that makes the disposition effect salient can alter decision-making. Overall, we find that prior to the intervention the traders exhibit the disposition e

SUBMITTER:  

PROVIDER: S-EPMC9996105 | biostudies-literature | 2023 Jan

REPOSITORIES: biostudies-literature