What Drives the Disposition Effect? An Analysis of a Long-Standing Preference-Based Explanation

By Nicholas Barberis. 2009

756 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance, General Decision Sciences

View Paper: https://www.semanticscholar.org/paper/3070ed430d96bd88cc1df31c745d375dc970cfd9

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Citations in the corpus

Does Prospect Theory Explain the Disposition Effect? (2011, background): “Alternatively, as Barberis and Xiong [ 2009 ] do, one could assume inter-temporal optimization and have investors anticipate the next period actions conditional on the future states of the world.”
Prospect Theory and Stock Market Anomalies (2020, background): “Barberis and Xiong (2009) find that prospect theory is more consistent with investor trading behavior for values of α and λ that are lower than those estimated by Tversky and Kahneman (1992). Meanwhile, even the lower level of loss aversion in (31) is strong enough to generate a high equity premium ”
The Impact of Salience on Investor Behavior: Evidence from a Natural Experiment (2019, neutral): “One strand of this literature has focused on constructing formal models to better understand the mechanism that generates the disposition effect (Barberis and Xiong 2009; 2012; Ingersoll and Jin 2013; Meng and Weng 2017); another strand has begun testing these models (Ben-David and Hirshleifer…”
Psychology-based Models of Asset Prices and Trading Volume (2018, background): “Subsequent to Barberis and Xiong’s (2009) findings, researchers have identified a number of ways in which prospect theory can generate a disposition effect.”
Once Burned, Twice Shy: How Naive Learning, Counterfactuals, and Regret Affect the Repurchase of Stocks Previously Sold (2011, neutral): “Hens and Vlcek (2007), Kaustia (2010), and Barberis and Xiong (2009) develop models in which, for reasonable parameter values, prospect theory preferences do not imply a disposition effect.”
Stocks as Lotteries: the Implications of Probability Weighting for Security Prices (2008, background): “Benartzi, S. and R. Thaler (1995), “Myopic Loss Aversion and the Equity Premium Puzzle,” Quarterly Journal of Economics 110, 75-92.”
Prospect Theory and the Brain (2009, background): “…moderate-probability gains and risk seeking for moderate-probability losses may contribute to the disposition effect in which investors have a greater tendency to sell stocks in their portfolios that have risen rather than fallen since purchase (Odean, 1998; but see also Barberis and Xiong, 2009).”
Investors’ Risk Preference Characteristics and Conditional Skewness (2014, result): “Thaler and Johnson [7] made an experiment and found that investors’ risk preferences depended on the psychological value of return, and a similar finding was reached elsewhere [8, 9].”
Variation in risk seeking behaviour following large losses: A natural experiment (2014, background): “Nevertheless, the non-experimental nature of these studies does not allow for the elimination of other confounding explanations (Barberis and Xiong 2009).”