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Richards, Daniel W.; Rutterford, Janette; Kodwani, Devendra and Fenton-O'Creevy, Mark
(2017).
DOI: https://doi.org/10.1080/1351847X.2015.1048375
Abstract
The disposition effect is an investment bias where investors hold stocks at a loss longer than stocks at a gain. This bias is associated with poorer investment performance and exhibited to a greater extent by investors with less experience and less sophistication. A method of managing susceptibility to the bias is through use of stop losses. Using the trading records of UK stock market individual investors from 2006 to 2009, this paper shows that stop losses used as part of investment decisions are an effective tool for inoculating against the disposition effect. We also show that investors who use stop losses have less experience and that, when not using stop losses, these investors are more reluctant to realise losses than other investors.
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About
- Item ORO ID
- 44069
- Item Type
- Journal Item
- ISSN
- 1466-4364
- Keywords
- behavioural finance; disposition effect; stop losses; investor experience; investor sophistication
- Academic Unit or School
-
Faculty of Business and Law (FBL)
Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL) > Business > Department for People and Organisations - Research Group
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Innovation, Knowledge & Development research centre (IKD) - Copyright Holders
- © 2015 Taylor & Francis
- Depositing User
- Mark Fenton-O'Creevy