Salience and the Disposition Effect: Evidence from the Introduction of 'Cash-Outs' in Betting Markets

40 Pages Posted: 4 Oct 2015 Last revised: 29 Sep 2016

See all articles by Alasdair Brown

Alasdair Brown

University of East Anglia (UEA)

Fuyu Yang

University of East Anglia (UEA) - School of Economic and Social Studies

Date Written: September 28, 2016

Abstract

The disposition effect describes the tendency of investors to sell assets that have increased in value since purchase, and hold those that have not. We analyse the introduction of betting market `Cash-Outs', which provide a continual update - and therefore increase the salience - of bettors' paper profits/losses on each bet. We find that the introduction of Cash-Out increased the disposition effect in this market, as punters sold their profitable bets with greater frequency than before. We do not, however, find that the disposition effect has any impact on asset prices, either before or after this intervention.

Keywords: disposition effect, salience, prospect theory, betting

JEL Classification: G02, G12, G14

Suggested Citation

Brown, Alasdair and Yang, Fuyu, Salience and the Disposition Effect: Evidence from the Introduction of 'Cash-Outs' in Betting Markets (September 28, 2016). Available at SSRN: https://ssrn.com/abstract=2668618 or http://dx.doi.org/10.2139/ssrn.2668618

Alasdair Brown (Contact Author)

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

Fuyu Yang

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
84
Abstract Views
604
rank
311,123
PlumX Metrics