TY  - UNPD
A1  - Lee, Carmen
A1  - Kräussl, Roman
A1  - Lucas, André
A1  - Paas, Leo
T1  - Why do investors sell losers? How adaptation to losses affects future capitulation decisions
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2010,23
N2  - According to disposition effect theory, people hold losing investments too long. However, many investors eventually sell at a loss, and little is known about which psychological factors contribute to these capitulation decisions. This study integrates prospect theory, utility maximization theory, and theory on reference point adaptation to argue that the combination of a negative expectation about an investment’s future performance and a low level of adaptation to previous losses leads to a greater capitulation probability. The test of this hypothesis in a dynamic experimental setting reveals that a larger total loss and longer time spent in a losing position lead to downward adaptations of the reference point. Negative expectations about future investment performance lead to a greater capitulation probability. Consistent with the theoretical framework, empirical evidence supports the relevance of the interaction between adaptation and expectation as a determinant of capitulation decisions. Keywords: Investments , Adaptation , Reference Point , Capitulation , Selling Decisions , Disposition Effect , Financial Markets JEL Classification: D91, D03, D81
T3  - CFS working paper series - 2010, 23 
KW  - Investments
KW  - Adaptation
KW  - Reference Point
KW  - Capitulation
KW  - Selling Decisions
KW  - Disposition Effect
KW  - Financial Markets
KW  - Kapitalanlage
KW  - Verlust
KW  - Anlageverhalten
Y1  - 2010
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/20478
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-87115
IS  - November 30, 2010
ER  -