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Cited by 353Financial Markets and Investment StrategiesDecision-Making and Behavioral EconomicsFinancial Literacy, Pension, Retirement Analysis

Are Investors Really Reluctant to Realize Their Losses? Trading Responses to Past Returns and the Disposition Effect

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Ben-David, Itzhak, Hirshleifer, David·2012·Review of Financial Studies
DOI 10.1093/rfs/hhs077
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Abstract

We examine how investor preferences and beliefs affect trading in relation to past gains and losses. The probability of selling as a function of profit is V-shaped; at short holding periods, investors are more likely to sell big losers than small ones. There is little evidence of an upward jump in selling at zero profits. These findings provide no clear indication that realization preference explains trading. Furthermore, the disposition effect is not driven by a simple direct preference for selling a stock by virtue of having a gain versus a loss. Trading based on belief revisions can potentially explain these findings. The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

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Authors
Ben-David, I., & Hirshleifer, D.
ORCID
Hirshleifer, David
Venue
Review of Financial Studies
Publisher
Oxford University Press (OUP)
Published
2012-07-08
Volume
25
Issue
8
Pages
2485-2532
ISSN
  • 0893-9454 (ISSN-L)
  • 1465-7368
DOI
10.1093/rfs/hhs077
OpenAlex
W3124521043
Cited by
353
References
5
Citations by year
2026: 21 · 2025: 32 · 2024: 59 · 2023: 25 · 2022: 23 · 2021: 29 · 2020: 17 · 2019: 31 · 2018: 25 · 2017: 26 · 2016: 16 · 2015: 15 · 2014: 15 · 2013: 9 · 2012: 8
FWCI
23.45
Type
journal article
Language
en
Open access
Locations
  • Review of Financial Studies (publishedVersion)
  • SSRN Electronic Journal (acceptedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
  • Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Literacy, Pension, Retirement Analysis
Keywords
disposition effect, investor trading behavior, loss realization, selling decisions, belief revision, investor preferences, holding period

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