Unformatted text preview: study, under a month, gains are 45 percent, 1 to 6 months were 7.8, 6 to 12 were 5.1 and more than one year was 4.5 percent. Investors acheive more pride from a larger gain but the reluctance to sell a loser is the same regardless if big or small. The disposition effect is pervasive and happens internationally as well and occurs in other investments besides stocks such as real estate or employee stock. However, the disposition effect and loss aversion do not occur in mutual funds; this is believe to be a result of blaming others and therefore having less regret. Along the lines of the disposition effect is that good news of a firm will cause selling while bad news will cause people to hold. A reference point is the comparison of a stock price that to its current price. An underreaction is the rebound of a stock after great news which was suppressed by selling to lock in profits....
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- Fall '10
- Investing, disposition effect, Hersh Shefrin, Meir Statman