Download This PaperThe Portfolio-Driven Disposition Effect
66 Pages Posted: 6 Mar 2018 Last revised: 28 May 2019
Date Written: May 25, 2019
Abstract
In simple univariate tests, the disposition effect for a stock nearly disappears if the portfolio is at a gain. We find a large disposition effect when the portfolio is at a loss. The portfolio-driven disposition effect that we document is not explained by extreme returns, portfolio rebalancing, simultaneous transactions, or investor sophistication/skill. We consider hedonic mental accounting and preferences over both paper and realized gains/losses as potential explanations for our findings.
Keywords: Disposition Effect, Realization Utility
JEL Classification: G11, G12, G40
Suggested Citation: Suggested Citation
An, Li and Engelberg, Joseph and Henriksson, Matthew and Wang, Baolian and Williams, Jared, The Portfolio-Driven Disposition Effect (May 25, 2019). Available at SSRN: https://ssrn.com/abstract=3126997 or http://dx.doi.org/10.2139/ssrn.3126997
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