The Disposition Effect, Emotion and Mindful Emotion Regulation

Wong, Ernest K. S. (2022). The Disposition Effect, Emotion and Mindful Emotion Regulation. PhD thesis The Open University.



The disposition effect is investors’ propensity to sell more gains than losses. Prior research shows this divestment pattern to be associated with inferior investment performance. Using a free trading simulation in an online, 2 × 2 factorial experimental study, this research investigated the respective roles of mindfulness and cognitive reappraisal in influencing retail investors’ disposition effect and its behavioural components, at the state and trait levels. At the state level, mindfulness was hypothesised to lessen the disposition effect, and perspective-taking as a financial advisor was hypothesised to reduce the disposition effect (via participants’ felt responsibility for their trading decisions), relative to the role of trading for their account. At the trait level, trait mindfulness and trait positive reappraisal were hypothesised to reduce the disposition effect, while trait catastrophising was proposed to increase the disposition effect.

The primary hypotheses for the thesis were broadly disconfirmed. Findings suggest that state mindfulness does not reduce the disposition effect. The think-as-an-advisor cognitive reappraisal intervention failed its manipulation check, so hypotheses associated with this variable could not be adequately tested. Reasons for the failure were explored, as were implications for interpreting prior research using the perspective-taking intervention. Trait mindfulness, trait positive reappraisal, and trait catastrophising showed no significant association with the disposition effect. A reasonably large sample (N = 820) combined with the randomised control experiment lends credence to these null results.

However, significant effects were detected when examining the cognitive-affective processes with the constituent divesting behaviours. A heightened state of mindfulness caused significantly reduced levels of selling of gains and losses. Trait catastrophising was associated with increased divestment of gains and losses, and elevated state mindfulness correlated to a lower tendency to catastrophise. It is well established that a common reason for investor under-performance is overtrading. The findings suggest that cognitive-affective processes helping investors become more mindful or less vulnerable to the tendency to catastrophise can be fruitful in reducing overtrading and thus, improving performance.

Viewing alternatives

Download history


Public Attention

Altmetrics from Altmetric

Number of Citations

Citations from Dimensions

Item Actions