How speculative asset characteristics shape retail investors' selling behavior

  • Using German and US brokerage data we find that investors are more likely to sell speculative stocks trading at a gain. Investors’ gain realizations are monotonically increasing in a stock’s speculativeness. This translates into a high disposition effect for speculative and a much lower disposition effect for non-speculative stocks. Our findings hold across asset classes (stocks, passive, and active funds) and explain cross-sectional differences in investor selling behavior which previous literature attributed primarily to investor demographics. Our results are robust to rank or attention effects and can be linked to realization utility and rolling mental account.

Download full text files

Export metadata

Author:Sabine Esther BernardGND, Martin WeberGND, Benjamin LoosORCiDGND
Parent Title (German):SAFE working paper series ; 378
Series (Serial Number):SAFE working paper (378)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2023
Year of first Publication:2023
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2023/01/31
Tag:Disposition Effect; Higher Moments of Return; Realization Utility; Retail Investor; Selling Behavior; Speculation
Issue:January 2023
Page Number:51
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:D Microeconomics / D1 Household Behavior and Family Economics / D14 Personal Finance
D Microeconomics / D8 Information, Knowledge, and Uncertainty / D81 Criteria for Decision-Making under Risk and Uncertainty
D Microeconomics / D9 Intertemporal Choice and Growth / D90 General
G Financial Economics / G1 General Financial Markets / G11 Portfolio Choice; Investment Decisions
Licence (German):License LogoDeutsches Urheberrecht