Measuring the disposition effect
(2021) Journal of Behavioral and Experimental Finance ā Vol. 29, nĀ° 100468, p. null-null (2021)
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- Abstract
- Despite hundreds of papers confirming the existence of the disposition effect, too little attention has been devoted to the prevailing arguments on the choice of a given method to measure it. This paper fills this gap and compares different measurement approaches. First, based on empirical and simulationbased data, I show how results may differ across measures depending on market trends but, more importantly, on the frequency at which investors make their decisions. Second, the pitfalls in analyzing cross-sectional differences in the disposition effect are illustrated and discussed. Finally, I clearly show that hazard models are quite appropriate to measuring the disposition effect of any investor, be it a day trader or a typical retail investor who monitors his portfolio infrequently.
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De Winne, R. (2021). Measuring the disposition effect. Journal of Behavioral and Experimental Finance, 29(100468), null-null. https://doi.org/10.1016/j.jbef.2021.100468 (Original work published 2021)