Investor horizon, experience, and the disposition effect

Zhebin Fan and Suman Neupane

Journal of Behavioral and Experimental Finance, 2024, vol. 44, issue C

Abstract: The disposition effect, characterized by the tendency to sell winning assets too soon and hold onto losing assets for too long, is a widely documented phenomenon among investors. Using granular trade-level data, we examine the disposition effect among different categories of foreign institutional investors (FIIs) in the context of an emerging market. Using survival analyses over several years, we find that short-term investors are most prone to disposition effects, while long-term investors are least prone. We also find that experience, as indicated by cumulative years in the market and the volume of stocks traded, mitigates the disposition effects, but only among long-term FIIs. While FIIs exhibit higher disposition effects during crisis periods, this effect is mitigated by experience, particularly among long-term FIIs. Our findings suggest that accounting for heterogeneity in institutional investors, rather than treating them as a whole, is important for a better understanding of financial markets.

Keywords: Disposition effect; Experience; Foreign Institutional Investors; Emerging Market; Investor Horizon (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2214635024001187

Related works:
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:beexfi:v:44:y:2024:i:c:s2214635024001187

DOI: 10.1016/j.jbef.2024.101003

Access Statistics for this article

Journal of Behavioral and Experimental Finance is currently edited by Michael Dowling and Jürgen Huber

More articles in Journal of Behavioral and Experimental Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().