Brexit and Disposition Effect: Evidence from New Zealand, Australia and Indian Stock Markets

23 Pages Posted: 15 Nov 2016

Date Written: November 16, 2016


This study investigated the disposition effect under economic crisis (Brexit & GFC) and found that the stock markets of New Zealand, Australia and Mumbai did not show any significant disposition effect during the crisis period. The paper utilizes secondary data analysis to discuss the disposition effect and employs the method developed by Weber and Camerer (1998) and operationalized by Lin (2011).

The finding of the study is consistent with the prediction that economic crisis does not necessarily show the disposition effect in these markets because as investors face major financial and economic crises, they may sell the losing stocks, since they are worried about larger loses in the future. The study results provide evidence that the investors may form a self-control mechanism (Lin, 2011) in order to prevent loss expansion during the crisis, and they will sell losing stocks once the losses exceed their limit of tolerance. The results also support the proposition that the presence of disposition effect is influenced by the market atmosphere and the “framing dependence” of investors, and when faced with high uncertainly like Brexit and GFC, investors sell losing stocks to prevent the spread of loss (Shefrin, 2000).

The study supports the finding of Boebel and Taylor (2000) who conducted the study based on account information of brokers of individual investors in the New Zealand market and found no disposition effect.

Keywords: IFRS, Disposition effect, mental accounting, loss aversion, regret avoidance, Brexit

JEL Classification: G10, G12, G19

Suggested Citation

Abraham, Mathew Puravady, Brexit and Disposition Effect: Evidence from New Zealand, Australia and Indian Stock Markets (November 16, 2016). Available at SSRN: or

Mathew Puravady Abraham (Contact Author)

Whitireia Business School ( email )

Level 2, 450 Queen Street
PO Box 106 219
Auckland, Auckland 1143
New Zealand

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