Do Behavioral Biases Affect Order Aggressiveness?
61 Pages Posted: 3 Oct 2016 Last revised: 30 Oct 2017
Date Written: December 1, 2015
We extend previous studies on the effect of behavioral biases on investor hold/sell decisions, and examine whether behavioral biases affect the order submission strategies. We use a unique database provided by the Shanghai Stock Exchange, which contains order submissions and executions as well as trading records of all investors. We find investors are less (more) aggressive in submitting sell orders for stocks that experienced losses (gains). The sell order aggressiveness is negatively related to the size of losses, but has a quadratic relationship with the size of gains. Results are consistent with the combination of the disposition and the house money effects.
Keywords: Order submission, Order aggressiveness, Disposition effect
JEL Classification: G12, G14, G18
Suggested Citation: Suggested Citation