〈Note〉Disposing of the Disposition Effect: Extant and Alternative Explanations

概要

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[Abstract] In this note, we critically survey the literature on one of the most puzzling phenomena in financial markets to be discovered recently, namely the so-called disposition effect—the observation that stock market investors tend to hold on to their losing stocks for too long and sell their winning stocks too soon. While we argue its importance might be overstated to a large extent in terms of its significance for understanding individual investor behavior, we also offer some ideas that could lead to new, more robust theories capable of explaining the disposition effect. We argue there are fundamental behavioral forces behind the latter that connect with basic traits of human behavior, forces that should be the in the spotlight of research aiming to explain market phenomena with individual behavior.