Do Professional Traders Exhibit Loss Realization Aversion

Locke, Peter; Mann, Steven C.; Alonzi, Peter; Barry, Chris; Battalio, Rob; Dwyer, Gerald P.; Kalay, Avner; Laux, Paul A.; Tkac, Paula A.; Manaster, Steve; Warga, Arthur

doi:10.2139/ssrn.251942

Cited by 63 publications

(54 citation statements)

References 27 publications

(26 reference statements)

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“…While the lab data are in line with the eld data discussed above, it would be comforting to nd consistent evidence from the empirical literature. In this regard, results in Genesove and Mayer [2001], Shapira and Venezia [2000], and Locke and Mann [2000] each lend important insights and suggest that this effect occurs in many different settings-from U. S. housing markets to Israeli and U. S. stock markets. For example, using a unique housing market data set drawn from Boston, Genesove and Mayer [2001] nd that seller behavior across investors and owner-occupants is different: owner-occupants exhibit about twice the degree of loss aversion that investors exhibit.…”

Section: Evidence From Nonmemorabilia Collectorsmentioning

confidence: 93%

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Does Market Experience Eliminate Market Anomalies?

List

2003

The Quarterly Journal of Economics

1,013

572

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This study examines individual behavior in two well-functioning marketplaces to investigate whether market experience eliminates the endowment effect. Field evidence from both markets suggests that individual behavior converges to the neoclassical prediction as market experience increases. In an experimental test of whether these observations are due to treatment (market experience) or selection (e.g., static preferences), I nd that market experience plays a signi cant role in eliminating the endowment effect. I also nd that these results are robust to institutional change and extend beyond the two marketplaces studied. Overall, this study provides strong evidence that market experience eliminates an important market anomaly.

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Section: Evidence From Nonmemorabilia Collectorsmentioning

confidence: 93%

“…Finally, studying trade histories for professional oor traders, Locke and Mann [2000] present evidence that suggests certain classes of "successful" traders exhibit less lossaverting behavior than their less-successful rivals.…”

Section: Evidence From Nonmemorabilia Collectorsmentioning

confidence: 96%

Does Market Experience Eliminate Market Anomalies?

List

2003

The Quarterly Journal of Economics

1,013

572

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“…The Þndings of Shefrin and Statman (1985), Odean (1998a), and Locke and Mann (1999) all suggest that traders may be subject to the disposition effect. That is, they may be more reluctant to unwind losing positions than winning positions.…”

Section: Time Until Midday Position Unwoundmentioning

confidence: 99%

Do Behavioral Biases Affect Prices?

2001

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This paper documents strong evidence of behavioral biases among Chicago Board of Trade proprietary traders and investigates the effect these biases have on prices. Our traders appear highly loss-averse. Traders who experience morning losses are about 15 percent more likely to assume above-average afternoon risk than traders with morning gains. This behavior has important short-term consequences for afternoon prices, as losing traders actively purchase contracts at higher prices and sell contracts at lower prices than those that prevailed previously. However, during the Þve minutes that follow these trades, prices revert strongly to their earlier levels. Consistent with these Þndings,

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“…On the other hand, Odean (1998) andLocke andMann (2000) argue that the disposition effect also compromises investment performance.…”

Section: Introductionmentioning

confidence: 99%

Disposition Effect Among Brazilian Equity Fund Managers

2015

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The disposition effect predicts that investors tend to sell winning stocks too soon and ride losing stocks too long. Despite the wide range of research evidence about this issue, the reasons that lead investors to act this way are still subject to much controversy between rational and behavioral explanations. In this article, the main goal was to test two competing behavioral motivations to justify the disposition effect: prospect theory and mean reversion bias. To achieve it, an analysis of monthly transactions for a sample of 51 Brazilian equity funds from 2002 to 2008 was conducted and regression models with qualitative dependent variables were estimated in order to set the probability of a manager to realize a capital gain or loss as a function of the stock return. The results brought evidence that prospect theory seems to guide the decision-making process of the managers, but the hypothesis that the disposition effect is due to mean reversion bias could not be confirmed.KEYWORDS | Loss aversion, disposition effect, prospect theory, mean reversion, logistic regression. RESUMO RAE-Revista de Administração de Empresas | FGV-EAESP

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Do Professional Traders Exhibit Loss Realization Aversion

Cited by 63 publications

References 27 publications

Does Market Experience Eliminate Market Anomalies?

Does Market Experience Eliminate Market Anomalies?

Do Behavioral Biases Affect Prices?

Disposition Effect Among Brazilian Equity Fund Managers

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