Knowledge Tree
Relations (1)
related 2.58 — strongly supporting 5 facts
The disposition effect is widely recognized as a direct consequence or variant of loss aversion, as established in prospect theory [1], [2], and [3]. Research consistently links these concepts within behavioral finance, noting that the disposition effect involves investors holding losing stocks due to the psychological mechanisms of loss aversion [4], [5].
Facts (5)
Sources
The Impact of Cognitive Biases on Professionals' Decision-Making frontiersin.org 4 facts
claimIndividual investors are impacted by overconfidence and the disposition effect, which is a consequence of loss aversion, in their decision-making.
claimThe disposition effect originates from loss aversion, a concept described in prospect theory by Kahneman and Tversky (1979).
claimThe disposition effect is typically related to loss aversion, a concept defined by Kahneman and Tversky (1979).
referenceResearch in behavioral finance has identified several cognitive biases affecting financial decision-making, including overconfidence (Barber and Odean 2000, 2001; Chuang and Lee 2006; Glaser and Weber 2007; Odean 1999), loss aversion (Benartzi and Thaler 1995), the disposition effect (Boolell-Gunesh et al. 2009; Odean 1998; Shefrin and Statman 1985), home bias (Coval and Moskowitz 1999), regression to the mean (De Bondt and Thaler 1985), and herding behavior (Grinblatt et al. 1995).
Biases in Behavioral Finance - World Scholars Review worldscholarsreview.org 1 fact
claimDuxbury et al. (2015) claimed that the house money effect coexists with the disposition effect, a variant of loss aversion where investors hold onto losing stocks and sell winning ones.