A Study of the Disposition Effect for Individual Investors in the Taiwan Stock Market

Yeong-Jia Goo, Dar-Hsin Chen, Sze-Hsun Sylcien Chang and Chi-Feng Yeh

Emerging Markets Finance and Trade, 2010, vol. 46, issue 1, 108-119

Abstract: We examine the disposition effect and identify its potential attributes for individual Taiwanese investors. The results indicate several interesting findings. First, only 26 percent of Taiwanese individual investors report slight gains in a bull market. Second, level of education is significantly associated with the disposition effect. Investors holding college or advance degrees have a lower disposition effect. Third, the status of gains or losses is also related to the disposition effect. The disposition effect is stronger in the losers' group. Finally, three preliminary elements, namely, avoiding regret, maximizing profits, and seeking pride, are highly correlated with respect to each other and this observation is backed up by the concept of the disposition effect.

Keywords: avoiding regret; confirmatory factor analysis (CFA); disposition effect; prospect theory; seeking pride (search for similar items in EconPapers)
Date: 2010
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