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  1. The disposition effect in boom and bust markets
    Author: Bernard, Sabine; Loos, Benjamin; Weber, Martin
    Published: [2021]
    Publisher:  Leibniz Institute for Financial Research SAFE, Sustainable Architecture for Finance in Europe, Frankfurt am Main

    The disposition effect is implicitly assumed to be constant over time. However, drivers of the disposition effect (preferences and beliefs) are rather countercyclical. We use individual investor trading data covering several boom and bust periods... more

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    Helmut-Schmidt-Universität, Universität der Bundeswehr Hamburg, Universitätsbibliothek
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    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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    DS 431
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    The disposition effect is implicitly assumed to be constant over time. However, drivers of the disposition effect (preferences and beliefs) are rather countercyclical. We use individual investor trading data covering several boom and bust periods (2001-2015). We show that the disposition effect is countercyclical, i.e. is higher in bust than in boom periods. Our findings are driven by individuals being 25% more likely to realize gains in bust than in boom periods. These changes in investors' selling behavior can be linked to changes in investors' risk aversion and in their beliefs across financial market cycles.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/229647
    Series: SAFE working paper ; no. 305
    Subjects: Disposition Effect; Financial Market Cycles; Household Finance; Retail Investor
    Scope: 1 Online-Ressource (circa 51 Seiten), Illustrationen
  2. Do robo-advisors make us better investors?
    Author: Back, Camila; Morana, Stefan; Spann, Martin
    Published: [2021]
    Publisher:  Collaborative Research Center Transregio 190, Munich, Germany

    Investors increasingly can obtain assistance from "robo-advisors," artificial intelligence - enabled digitalized service agents imbued with anthropomorphic design elements that can communicate using natural language. The present article considers the... more

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    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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    Investors increasingly can obtain assistance from "robo-advisors," artificial intelligence - enabled digitalized service agents imbued with anthropomorphic design elements that can communicate using natural language. The present article considers the impact of anthropomorphized robo-advisors on investment decisions, with a focus on their ability to mitigate investors’ behavioral biases. We study the well-documented disposition effect, which reflects investors’ greater propensity to realize past gains than past losses. In two induced-value laboratory experiments, the availability of a robo-advisor reduces (i.e., mitigates) investors’ disposition effect. This relationship is mediated by two simultaneous (indirect) effects: the extent of requests for the robo-advisor’s investment advice and perceptions of its socialness. These findings resonate with cognitive dissonance theory, which predicts that assigning responsibility to the advisor helps investors resolve a sense of discomfort that may arise after a financial loss. Anthropomorphic design elements alone are not sufficient to reduce the disposition effect, but they decrease investors’ propensity to seek advice, which offsets the positive (indirect) effect of perceived socialness. These results have implications for the ongoing automation of advisory services, as well as for improving decision making, and suggest some further research directions.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/233499
    Series: Discussion paper / Rationality & Competition, CRC TRR 190 ; no. 276 (February 5, 2021)
    Subjects: Robo-Advisors; Artificial Intelligence; Advice; Anthropomorphism; Disposition Effect
    Scope: 1 Online-Ressource (circa 58 Seiten), Illustrationen
  3. Decomposing the disposition effect
    Author: Maier, Johannes K.; Fischer, Dominik Simon
    Published: [2021]
    Publisher:  Collaborative Research Center Transregio 190, [München]

    We theoretically show that there is a fundamental disconnect be- tween the disposition effect, i.e., investors’ tendency to sell winning assets too early and losing assets too late, and its common empirical measure, namely a positive difference... more

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    Verlag (kostenfrei)
    Resolving-System (kostenfrei)

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 553
    Inter-library loan:
    No inter-library loan

     

    We theoretically show that there is a fundamental disconnect be- tween the disposition effect, i.e., investors’ tendency to sell winning assets too early and losing assets too late, and its common empirical measure, namely a positive difference between the proportion of gains and losses re- alized. While its common measure cannot identify the disposition effect, it identifies the presence of some systematic bias. We further investigate the measure’s comparative statics regarding markets, investors’ information level, and their attention. Besides generating novel testable predictions, this analysis reveals that, in contrast to the measure’s sign, variations in its magnitude are informative for its cause.

     
    Export to reference management software   RIS file
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/244328
    Series: Discussion paper / Rationality & Competition, CRC TRR 190 ; no. 288 (October 18, 2021)
    Subjects: Disposition Effect; Rational Benchmark; Investor Behavior; Behavioral Biases; Market Segments; Financial Attention; Information Level
    Scope: 1 Online-Ressource (circa 59 Seiten), Illustrationen