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Disposition Effect

‘The second paper, by Meir Statman and me, applied Kahneman and Tversky’s notion of framing to the realization of loses. We called this phenomenon the disposition effect, arguing that investors are predisposed to holding losers too long and selling winners too early.’
Shefrin (2000), page 8

‘Meir Statman and I (Shefrin and Statman 1985) coined the term disposition effect, as shorthand for the predisposition toward get-evenitis.’
Shefrin (2000) page 107

‘Shefrin and Statman (1985) predicted that because people dislike incurring losses much more than they enjoy making gains, and people are willing to gamble in the domain of losses, investors qill hold onto stocks that have lost value (relative to the reference point of thir purchase) and will be eager to sell stocks that have risen in value. They called this the disposition effect.’
Montier (2002) pages 23–24

‘Avoiding regret and seeking pride affects people’s behavior, but how does it affect investment decisions? This is called the disposition effect.’
Nofsinger (2001) page 47

Top 10 Papers

1. WEBER, M. and C.F. CAMERER, 1998. The disposition effect in securities trading: an experimental analysis. Journal of Economic Behavior and Organization. [Cited by 210] (19.71/year)
2. FERRIS, S.P., R.A. HAUGEN and A.K. MAKHIJA, 1988. … volume with historic volume at differential price levels: Evidence supporting the disposition effect. Journal of Finance. [Cited by 121] (5.86/year)
3. DHAR, R. and N. ZHU, 2006. Up close and personal: An individual level analysis of the disposition effect. Management Science. [Cited by 80] (30.11/year)
4. GRINBLATT, M. and B. HAN, 2002. The disposition effect and momentum. NBER working paper. [Cited by 94] (14.12/year)
5. FRAZZINI, A., 2006. The disposition effect and underreaction to news. The Journal of Finance. [Cited by 86] (32.37/year)
6. SHEFRIN, H. and M. STATMAN, 1985. The disposition to sell winners too early and ride losers too long: Theory and evidence. Journal of Finance. [Cited by 614] (25.95/year)
7. DHAR, R. and N. ZHU, 2006. Up close and personal: Investor sophistication and the disposition effect. Management Science. [Cited by 23] (8.66/year)
8. RANGUELOVA, E., 2001. Disposition effect and firm size: New evidence on individual investor trading activity. Center for Mathematics and Computer Science (CWI). [Cited by 34] (4.44/year)
9. CHUI, P.M.W., 2001. An experimental study of the disposition effect: Evidence from Macau. The Journal of Psychology and Financial Markets. [Cited by 20] (2.61/year)
10. BARBERIS, N. and W. XIONG, 2006. What drives the disposition effect? An analysis of a long-standing preference-based explanation. NBER Working Paper. [Cited by 32] (12.04/year)

Links

• Wikipedia: Disposition effect

Bibliography

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