The Return of Statisfaction: A study on the Consequences for Investor Behavior
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2017-08-31
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en
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In this study I will shed new light on investors’ satisfaction levels, risk preferences and trading decisions using stock price development patterns. These patterns significantly influence investor satisfaction and behavior. By using and expanding the experiment done by Grosshans and Zeisberger (2016) I am able to find evidence of investor’s preference bias on future trading decisions. These results suggest that investors with a positive bias towards a certain company tend to make lower risk expectations. In accordance, evidence is presented in which the influence of a bias on return expectations becomes more clear. The use of reference points in combination with trading decisions clearly explains and shows presence the disposition effect. Investors not only tend to hold loser stocks for too long, but also, more moderately, if they are satisfied with a stock’s performance. Finally, early evidence of a relationship between a preference bias and the disposition effect is presented. These results add to Prospect theory, risk-taking behavior, trading decision theory, and extend the ‘traditional’ mean-variance trade-off introduced by Markowitz (1952).
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Faculteit der Managementwetenschappen