Risk aversion and the disposition effect: differences between men and women
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2021-12-14
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en
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Abstract
Many papers have already investigated the disposition effect: the tendency to sell winner stocks faster than loser stocks. Literature has covered the explanation of the disposition effect, that include prospect theory and the belief in mean reversal. Next to that, it used both experimental and empirical data to study the bias and the effect that investor characteristics can have. It has yet to shed a light on the relationship between risk aversion and the disposition effect. This paper aims to do so, by also testing for differences in gender. By using 3 methods on an already existing data set, 3 hypotheses will be tested. Odean’s ratio-based approach, logistic regression and survival analysis will be used to test if the effect is present, what effect risk aversion has and if there are gender differences. My results show that the investors are not prone to the disposition effect and are not reluctant to sell their losses. Risk aversion has no significant relationship with the disposition effect and that being a woman increasing the odds of selling a position that is trading at a loss. Females are less susceptible to the tendency of not selling their losses and selling their winners too fast.
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Faculteit der Managementwetenschappen