Work

Disposition Effect and Diminishing Sensitivity: An Analysis Based on a Simulated Experimental Stock Market

Year: 2017

Type: article

Abstract: The authors experimentally investigate the existence of the disposition effect and its relationship with diminishing sensitivity. Their approach includes 3 key characteristics: (i) an environment closely resembling actual stock markets, (ii) individual-specific reference prices, and (iii) a direct test of diminishing sensitivity as a correlate of the disposition effect. They find strong support for the existence of the disposition effect as an independent hypothesis. This is an improvement over previous studies, which tested this hypothesis only jointly with others. The authors' results also strongly point to diminishing sensitivity, of the type postulated by prospect theory, being positively associated with the disposition effect.

Source: Journal of Behavioral Finance

DOI: 10.1080/15427560.2017.1308941

Authors: Youki Kohsaka, Grzegorz Mardyla, Shinji Takenaka, Yoshiro Tsutsui

Institutions: Fukuyama University, Kindai University, Japan Center for Economic Research, Konan University

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2256143624

FWCI: 1.296

Cites: 32

Cited by: 9

Related to: 10