Loading...

The Relationship Between the Disposition Effect and the Characteristics of Investors

Mokhtari, Mohammad Mahdi | 2025

54 Viewed
  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 58665 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Ebrahimnejad, Ali
  7. Abstract:
  8. In traditional financial theory, investors aim to maximize returns while minimizing risk by using all available information to make informed choices. However, behavioral finance shows that investors often deviate from fully rational behavior due to cognitive biases. In reality, investor decisions result from a complex interplay of rational and behavioral elements. The disposition effect, a common behavioral bias among investors, refers to the tendency to sell winning stocks too early while holding onto losing stocks for too long. This phenomenon was first examined by Shefrin and Statman (1985), and subsequent research has explored and confirmed its existence among various investor groups. Although well-documented, its variations at the individual level and across different demographic groups—particularly in Iran—remain underexplored. In other words, which personality or demographic characteristics of retail investors are associated with and may exacerbate this bias? This study investigates the disposition effect by analyzing the trading records of approximately 20,000 individual investors. While prior research has examined this effect at an aggregate level, our primary goal is to identify individual differences in this bias and its correlation with investor characteristics. The findings indicate that women exhibit a stronger disposition effect compared to men. Additionally, older investors display a more pronounced bias. The average number of trades has a positive impact on reducing the disposition effect. Identifying and understanding this effect can help improve financial decision-making, develop investment strategies, and prevent behavioral errors. Furthermore, policymakers, financial institutions, and financial educators can use the results of this research to design more effective training and advisory programs, ultimately enhancing the overall performance of financial markets
  9. Keywords:
  10. Disposition Effect ; Behavioral Finance ; Individual Difference Variables ; Investor Characteristics ; Behavioral Bias

 Digital Object List

 Bookmark

No TOC