How Speculative Asset Characteristics Shape Retail Investors’ Selling Behavior
51 Pages Posted: 12 Jan 2023 Last revised: 31 Jan 2023
Date Written: January 12, 2023
Using German and US brokerage data we find that investors are more likely to sell speculative stocks trading at a gain. Investors’ gain realizations are monotonically increasing in a stock’s speculativeness. This translates into a high disposition effect for speculative and a much lower disposition effect for non-speculative stocks. Our findings hold across asset classes (stocks, passive, and active funds) and explain cross-sectional differences in investor selling behavior which previous literature attributed primarily to investor demographics. Our results are robust to rank or attention effects and can be linked to realization utility and rolling mental account.
Keywords: Selling Behavior, Disposition Effect, Retail Investor, Speculation, Higher Moments of Return, Realization Utility
JEL Classification: D14, D81, D9, G11
Suggested Citation: Suggested Citation