Investor Attention, Reference Points and the Disposition Effect

54 Pages Posted: 21 Jul 2019

See all articles by John Gathergood

John Gathergood

University of Nottingham - School of Economics

George Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences

Edika Quispe-Torreblanca

University of Oxford - Said Business School

Neil Stewart

Warwick Business School, University of Warwick

Date Written: July 19, 2019

Abstract

Using login data from an online trading brokerage, we test whether investors have a greater propensity to sell assets when they have made a gain rather than a loss relative to the price at their latest login to their account. This disposition effect on returns since latest login exists alongside the widely-documented disposition effect on returns since purchase. We also show a strong interaction effect: investors tend to hold on to stocks that have made either a negative return since latest login or a negative return since purchase. Even a small loss since latest login annuls the disposition effect of a much larger gain since purchase. We interpret these findings in a Prospect Theory inspired model of realization utility with enhanced loss aversion.

Keywords: disposition effect, attention, login, investor behavior

JEL Classification: G40, G41, D14

Suggested Citation

Gathergood, John and Loewenstein, George F. and Quispe-Torreblanca, Edika and Stewart, Neil, Investor Attention, Reference Points and the Disposition Effect (July 19, 2019). Available at SSRN: https://ssrn.com/abstract=3422790 or http://dx.doi.org/10.2139/ssrn.3422790

John Gathergood (Contact Author)

University of Nottingham - School of Economics ( email )

Sir Clive Granger Building
University Park
Nottingham, NG7 2RD
United Kingdom

HOME PAGE: http://https://sites.google.com/site/gathergoodjohn/

George F. Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States
412-268-8787 (Phone)
412-268-6938 (Fax)

Edika Quispe-Torreblanca

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Neil Stewart

Warwick Business School, University of Warwick ( email )

Gibbet Hill Road
Coventry, West Midlands CV4 8UW
United Kingdom

HOME PAGE: http://www.stewart.warwick.ac.uk

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