Peer Pressure: Social Interaction and the Disposition Effect

Heimer, Rawley Z.

doi:10.1093/rfs/hhw063

Cited by 253 publications

(71 citation statements)

References 68 publications

(57 reference statements)

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“…An explanation for Shapira and Venezia's (2001) results might be that the trading experience of professional traders leads to improved trading performance (Ackert and Church, 2001;Da Costa Jr. et al, 2013). However, a couple of behavioral effects matter, such as, for instance, the perceived degree of loss aversion (Kahneman and Tversky, 1979), emotional responses (Shefrin and Statman, 1985;Summers and Duxbury, 2012) or reputational effects (Heimer, 2016;Pelster and Hofmann, 2017).…”

Section: Introductionmentioning

confidence: 99%

The disposition effect when deciding on behalf of others

Hermann

Mußhoff

Rau

2019

Journal of Economic Psychology

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The disposition effect is a well-established phenomenon which describes the behavior of investors that are more willing to sell capital gains than capital losses. In this article we present experimental evidence on a situation where an investor decides on behalf of another person. In our setting, trading effort should only be affected by investors' intrinsic motivation, as trading actions only influence the profits of a matched person. In a control treatment, trades directly influence investors' profits. Overall, we find that trading on behalf of others increases disposition effects. In this treatment, we find that the effect is caused by inexperienced investors, characterized by a greater concern for others. Thus, trading for others results in an emotional burden for these investors, which leads to weak trading performance.

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Section: Introductionmentioning

confidence: 99%

The disposition effect when deciding on behalf of others

Hermann

Mußhoff

Rau

2019

Journal of Economic Psychology

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“…These factors failed to draw any significant impact on other important influential factors. The least influence of social networking contradicted the findings of Heimer (2016). Bull and Bearish markets were found to be the influencing factors in a study conducted by Leal et al, (2008).…”

Section: Discussionmentioning

confidence: 68%

“…Frazzini (2006) obtains data from mutual fund holdings to show the relationship between under-reaction of stock prices to public news and this type of under-reaction is followed by the disposition effect of mutual fund managers. Heimer (2016) presented the relationship between social contact and the disposition effect by utilizing an online social networking platform in the world of retail trading.…”

Section: Under-reaction (U)mentioning

confidence: 99%

Factors Affecting Disposition Effect in Equity Investment: A Social Network Analysis Approach

Kajol

Biswas²,

Singh

et al. 2020

ijafr

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The study aims at identifying the factors influencing the disposition effect acting on equity investors and further identifying the relationship between the influencing factors. The study aims at conducting a complete analysis of the influencing factors along with measuring their impact on disposition effect using Social Network Analysis (SNA).The factors affecting disposition effect on investors were identified through the literature review. Experts’ opinions were sought for determining the relationship among the factors and finally, the importance of those factors was analyzed using Social Network Analysis (SNA). It was found that social trust, investor emotion are the two most important factors affecting the other factors of disposition effect and consequently disposition effect finally. Besides, mental accounting; regret aversion, trading intensity, trading volume, and portfolio performance strongly influence the effect of disposition on investors because of their higher in-degree and out-degree. Therefore, the policymakers need to impart training to the investors to understand the mechanism of the stock market so that they can evaluate their standing in the stock market which, in the long run, will be reflected in their investment behavior.

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“…The gains in the objective function (19), visualized in Figure 2, are monotone increasing in (φ, a).…”

Section: Numerical Illustrationmentioning

confidence: 99%

‘To have what they are having’: portfolio choice for mimicking mean–variance savers

Golosnoy

Parolya

2017

Quantitative Finance

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We consider a group of mean-variance investors with mimicking desire such that each investor is willing to penalize deviations of his portfolio composition from compositions of other group members.Penalizing norm constraints are already applied for statistical improvement of Markowitz portfolio procedure in order to cope with estimation risk. We relate these penalties to individuals' wish of social learning and introduce a mutual fund (investment club) aggregating group member preferences unknown for individual savers. We derive the explicit analytical solution for the fund's optimal portfolio weights and show advantages to invest in such a fund for individuals willing to mimic. JEL Classification: G11, G23, C61, C44

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Peer Pressure: Social Interaction and the Disposition Effect

Cited by 253 publications

References 68 publications

The disposition effect when deciding on behalf of others

The disposition effect when deciding on behalf of others

Factors Affecting Disposition Effect in Equity Investment: A Social Network Analysis Approach

‘To have what they are having’: portfolio choice for mimicking mean–variance savers

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