Munich Personal RePEc Archive

The disposition effect and investor experience

Da Costa Jr, Newton and Goulart, Marco and Cupertino, Cesar and Macedo Jr, Jurandir and Da Silva, Sergio (2013): The disposition effect and investor experience.

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Abstract

We examine whether investing experience can dampen the disposition effect, that is, the fact that investors seem to hold on to their losing stocks to a greater extent than they hold on to their winning stocks. To do so, we devise a computer program that simulates the stock market. We use the program in an experiment with two groups of subjects, namely experienced investors and undergraduate students (the inexperienced investors). As a control procedure, we consider random trade decisions made by robot subjects. We find that though both human subjects show the disposition effect, the more experienced investors are less affected.

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