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Stats › Active, passive and flows › Disposition effect

Investors sold the stocks that went on to win and held the ones that went on to lose

84 days p = 0.002: 1.03%+1.03%84 daysp = 0.002252 days p = 0.001: 3.41%+3.41%252 daysp = 0.001504 days p = 0.014: 3.58%+3.58%504 daysp = 0.014

Excess return over the market of the stocks investors sold minus the stocks they held, measured at three horizons after the sale. 10,000 randomly selected discount brokerage accounts, trades January 1987 to December 1993. Significance comes from bootstrapped distributions rather than t statistics.

Individual investors were about 50% more likely to sell a winner than a loser. The stocks they sold went on to beat the stocks they held by 3.41 percentage points over the following year, and in December the preference reverses.

1.51Ratio of gains realised to losses realised, full year
0.21Account level difference, t = 19.7
3.41ppExcess return of sold stocks over held stocks, one year later
3.58ppThe same over 504 trading days

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