Disposition Matters: Volume, Volatility and Price Impact of a Behavioral Bias

William Goetzmann () and Massimo Massa

No 9499, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we estimate the behavioral component of the Grinblatt and Han (2002) model and derive several testable implications about the expected relationship between the preponderance of disposition-prone investors in a market and volume, volatility and stock returns. To do this, we use a large sample of individual accounts over a six-year period in the 1990's in order to identify investors who are subject to the disposition effect. We then use their trading behavior to construct behavioral factors. We show that when the fraction of irrational' investor purchases in a stock increases, the unexplained portion of the market price of the stock decreases. We further show that statistical exposure to a disposition factor explains cross-sectional differences in daily returns, controlling for a host of other factors and characteristics. The evidence is consistent with the hypothesis that trade between disposition-prone investors and their counter-parties impacts relative prices.

JEL-codes: D1 G1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-fmk
Date: 2003-02
Note: AP
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w9499.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: Disposition Matters: Volume, Volatility and Price Impact of a Behavioral Bias (2004)
Working Paper: Disposition Matters: Volume, Volatility and Price Impact of a Behavioral Bias (2003)
Working Paper: Disposition Matters: Volume, Volatility and PriceImpact of a Behavioral Bias (2003)
Working Paper: Disposition Matters: Volume, Volatility and Price Impact of Behavioral Bias (2005)
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: http://EconPapers.repec.org/RePEc:nbr:nberwo:9499

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9499
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().