Impact of Price Path on Disposition Bias

Avijit Bansal and Joshy Jacob

Journal of Banking & Finance, 2022, vol. 143, issue C

Abstract: Recent experimental studies illustrate the influence of price path, particularly the ‘non-straight’ price path, on several aspects of investor decision-making. The paper employs an empirical proxy for price path based on convexity and demonstrates that price convexity significantly impacts the selling decisions with transaction-level data. We find that a price path that is likely to signal a favourable (unfavourable) price movement in the future lowers (heightens) the selling propensity of traders in stocks. The findings suggest that likely expectations about future price movement, as could be inferred from the experienced price path, significantly influence the trading decisions of retail traders.

Keywords: Price Path; Investor Behaviour; Behavioural Finance; Disposition Bias; Equity market (search for similar items in EconPapers)
JEL-codes: G11 G40 G41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:143:y:2022:i:c:s0378426622001960

DOI: 10.1016/j.jbankfin.2022.106616

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