Do Losses Linger? Evidence from Proprietary Stock Traders

Posted: 22 May 2008

See all articles by Ryan Garvey

Ryan Garvey

Duquesne University

Anthony Murphy

University of Oxford - Nuffield College of Medicine

Fei Wu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Abstract

We examine how professional stock traders, working for a Nasdaq market maker, are influenced by their recent trading performance. Our results show that, in aggregate, when the traders incur morning losses, their desire to recoup these losses before the close of trading leads them to trade more aggressively in the afternoon. This behavior is consistent with the behavior underlying the disposition effect. An analysis of individual trading performance shows that traders who are more influenced by their prior trading losses perform far worse than those who are less influenced.

Suggested Citation

Garvey, Ryan and Murphy, Anthony and Wu, Fei, Do Losses Linger? Evidence from Proprietary Stock Traders. Journal of Portfolio Management, Vol. 33, pp. 75-83, 2007. Available at SSRN: https://ssrn.com/abstract=1099549

Ryan Garvey (Contact Author)

Duquesne University ( email )

600 Forbes Avenue
Pittsburgh, PA 15282
United States

Anthony Murphy

University of Oxford - Nuffield College of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

Fei Wu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

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