Publication Type
Conference Paper
Version
acceptedVersion
Publication Date
7-2010
Abstract
Using a large proprietary database of institutional trades, we investigate whether, and to what extent, the dynamic adaptation of reference point translates into variations in the disposition effect, and establish three key results. First, the propensity to realize losses declines sharply with the magnitude of prior losses due to insufficient adaptation of reference point. Second, recent adverse information accelerates investors’ adaptation to price depreciation and increases investors’ willingness to realize losses. Finally, a priori of losing money in highly speculative investments decreases investors’ aversion to realize losses. Collectively, the findings suggest that both prior outcomes and recent expectations contribute to the reference point adaptation and the variations in disposition effect.
Keywords
disposition effect, prospect theory, reference point adaptation, institutional investors
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Financial Management Association Asian Conference, Singapore, 14-16 July 2010
First Page
1
Last Page
51
City or Country
Singapore
Citation
CHIYACHANTANA, Chiraphol N. and YANG, Zongfei.
Reference Point Adaptation and Disposition Effect: Evidence from Institutional Trading. (2010). Financial Management Association Asian Conference, Singapore, 14-16 July 2010. 1-51.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/3038
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.