Disposition effect in fund managers. Fund and stock-specific factors and the upshot for investors

Laura Andreu, Cristina Ortiz and José Luis Sarto

Journal of Economic Behavior & Organization, 2020, vol. 176, issue C, 253-268

Abstract: This paper evaluates the presence of disposition effect in Spanish equity funds and its implications for investors. We find that disposition spread is not a widespread bias, but it exists across funds. This effect is especially intense during the crisis period, but it is mitigated in large management companies or in those that belong to bank holding groups. For a new insight when disentangling managers’ decisions, this study shows that the disposition effect is not only a cognitive bias inherent to the person, but it mostly depends on the type of transactions. Partial sales, domestic stocks, stocks with low portfolio weights, and stocks with lower past returns are disposition-prone. The existence of disposition effect is confirmed; however, investors are not harmed in terms of fund performance.

Keywords: Disposition effect; Mutual funds; Crisis period; Management company; Partial sales; Stock industry (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:176:y:2020:i:c:p:253-268

DOI: 10.1016/j.jebo.2020.04.002

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