The Causal Effect of Stop-Loss and Take-Gain Orders on the Disposition Effect

Urs Fischbacher, Gerson Hoffmann and Simeon Schudy

The Review of Financial Studies, 2017, vol. 30, issue 6, 2110-2129

Abstract: We investigate whether automatic selling devices causally reduce investors’ disposition effect (DE) in a laboratory experiment. Investors can actively buy and sell assets. Investors in the treatment group use stop-loss and take-gain options to automatically sell assets. In addition, we introduce a reminder condition that reminds investors about their selling plan if a limit is hit. Results show that the automatic selling device treatment significantly reduces the DEs, but the reminder treatment does not. Thus, the opportunity to ex ante commit to automatically selling at a loss causally reduces the disposition effect.

JEL-codes: C91 G02 G11 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhx016 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Causal Effect of Stop-Loss and Take-Gain Orders on the Disposition Effect (2017)
Working Paper: The Causal Effect of Stop-Loss and Take-Gain Orders on the Disposition Effect (2014)
Working Paper: The causal effect of stop-loss and take-gain orders on the disposition effect (2014)
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:oup:rfinst:v:30:y:2017:i:6:p:2110-2129.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().