Realization utility

Nicholas Barberis and Wei Xiong

Journal of Financial Economics, 2012, vol. 104, issue 2, 251-271

Abstract: A number of authors have suggested that investors derive utility from realizing gains and losses on assets that they own. We present a model of this “realization utility,” analyze its predictions, and show that it can shed light on a number of puzzling facts. These include the disposition effect, the poor trading performance of individual investors, the higher volume of trade in rising markets, the effect of historical highs on the propensity to sell, the individual investor preference for volatile stocks, the low average return of volatile stocks, and the heavy trading associated with highly valued assets.

Keywords: Behavioral finance; Disposition effect; Trading; Individual investors (search for similar items in EconPapers)
JEL-codes: D03 G11 G12 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (71)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X11002376
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Realization Utility (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:104:y:2012:i:2:p:251-271

DOI: 10.1016/j.jfineco.2011.10.005

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().