Exchange-traded certificates, education and the disposition effect

Silva, Paulo Pereira da; Mendes, Victor

doi:10.1016/j.jbef.2020.100456

Cited by 2 publications

(6 citation statements)

References 41 publications

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“…Its applications were mainly identified by several authors. The study of DE in case of IPOs [10] and taxation [11] is observed. Also, studies of DE in the context of demographics are done [10,11].…”

Section: Specific Contribution Of Research Workmentioning

confidence: 99%

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Does the Disposition Effect Justify the Options Traders’ Irrationality?

Choubey,

Joshi

2024

jour

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The options trader's decisions are expected to be rational decisions but an element of irrationality is observed in decision making. The Disposition effect is the behavioral aspect of an investor which explains his irrational decision-making. The disposition effect is the tendency to keep losing positions too long and selling winning positions too early. The present research work studies the disposition effect in options trading. Options are derivatives of underlying assets which give the holder the right to exercise them at a given date and price. In this research work, elements of disposition effect namely, Herding (HE), Mental accounting (MA), Risk Aversion (RA) are studied along with Trade enablers (TE) and Cost consciousness (CC). The data was collected from 250 respondents' trading options on the National Stock Exchange, India. The collected data was analyzed using Structured Equation Modeling (SEM). The results reflected that the disposition effect existed in decisionmaking by options traders. Trade Enabler consisting of Time decay and Open Interest, and Herding emerged as significant elements of disposition effect for options trading. Mental accounting, risk aversion, and cost-consciousness emerged as less significant elements affecting the disposition effect in options trading.

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Section: Specific Contribution Of Research Workmentioning

confidence: 99%

“…The study of DE in case of IPOs [10] and taxation [11] is observed. Also, studies of DE in the context of demographics are done [10,11]. This paper studies the applicability of the disposition effect on options traders' behavior, which is lacking in the existing literature.…”

Section: Specific Contribution Of Research Workmentioning

confidence: 99%

Does the Disposition Effect Justify the Options Traders’ Irrationality?

Choubey,

Joshi

2024

jour

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“…Such investors take a lower risk and sell immediately as the risk factor increases (Betzer et al , 2021). The increasing level of education makes ETC investors more aware and reduces the role of the disposition effect in their decision-making (da Silva and Mendes, 2021; Vaarmets et al , 2019). Trading experience further protects investors against the disposition effect (Choe and Eom, 2009; da Costa et al , 2013; Feng and Seasholes, 2005; da Silva and Mendes, 2021).…”

Section: Content Analysismentioning

confidence: 99%

“…The increasing level of education makes ETC investors more aware and reduces the role of the disposition effect in their decision-making (da Silva and Mendes, 2021; Vaarmets et al , 2019). Trading experience further protects investors against the disposition effect (Choe and Eom, 2009; da Costa et al , 2013; Feng and Seasholes, 2005; da Silva and Mendes, 2021). Learning ability also reduces investors’ susceptibility to the disposition effect.…”

Section: Content Analysismentioning

confidence: 99%

“…However, Dai et al (2022) present a model to explain the disposition effect due to rebalancing. Stoploss, education and experience can significantly mitigate the disposition effect (Choe and Eom, 2009; da Costa et al , 2013; Richards et al , 2017; da Silva and Mendes, 2021). Automated sell trades help reduce the disposition effect (Fischbacher et al , 2017).…”

Section: Introductionmentioning

confidence: 99%

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Demystifying disposition effect: past, present and future

Joshipura

Joshipura²,

Sharma

2023

QRFM

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Purpose The disposition effect remains one of the most significant investor behavior puzzles. This study aims to consolidate the knowledge, explore current dynamics, elicit trends and offer future research directions to demystify the disposition effect. Design/methodology/approach This study applies the hybrid review method. It first used bibliometric analysis (212 documents), followed by content analysis (54 articles) to analyze the breadth and depth of literature on the disposition effect. Findings This study presents performance analysis and science mapping. It identifies five main research streams: evidence, implications and mitigation techniques; theoretical explanations; investor biases and hedonic framing; attributes, beliefs and preferences; and implications for asset pricing and market efficiency. This study further offers future research directions for disposition effect research. Research limitations/implications This study deploys sequential bibliometric and content analysis. A meta-analysis of quantitative articles could provide specific insights regarding the disposition effect. Besides, this study is based on Scopus-indexed journals only. Practical implications This study benefits investors and portfolio managers as they learn effective ways to guard against the disposition effect. Policymakers may tweak tax laws to incentivize long-term holding, and regulators can run investor education campaigns to minimize the disposition effect’s consequences effectively. Originality/value To the best of the authors’ knowledge, this is probably the first hybrid review of high-quality, contemporary articles on the disposition effect that offers science mapping, research streams, future research directions and a succinct summary of theories, contexts, characteristics and methods deployed in the field of research.

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Exchange-traded certificates, education and the disposition effect

Cited by 2 publications

References 41 publications

Does the Disposition Effect Justify the Options Traders’ Irrationality?

Does the Disposition Effect Justify the Options Traders’ Irrationality?

Demystifying disposition effect: past, present and future

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