Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245515 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9334
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We theoretically show that there is a fundamental disconnect between the disposition effect, i.e., investors' tendency to sell winning assets too early and losing assets too late, and its common empirical measure, namely a positive difference between the proportion of gains and losses realized. While its common measure cannot identify the disposition effect, it identifies the presence of some systematic bias. We further investigate the measure's comparative statics regarding markets, investors' information level, and their attention. Besides generating novel testable predictions, this analysis reveals that, in contrast to the measure's sign, variations in its magnitude are informative for its cause.
Subjects: 
disposition effect
rational benchmark
investor behaviour
behavioural biases
market segments
financial attention
information level
JEL: 
D90
D91
D83
D84
G11
G40
G41
Document Type: 
Working Paper
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