Investor characteristics and the disposition effect

Authors

Alessandro Frino, Macquarie UniversityFollow
Grace Lepone, Macquarie University
Danika Wright, University of Sydney

RIS ID

117828

Publication Details

Frino, A., Lepone, G. & Wright, D. (2015). Investor characteristics and the disposition effect. Pacific-Basin Finance Journal, 31 1-12.

Abstract

This paper studies the prevalence of the disposition effect in individual traders in the Australian equities market. In particular, we examine the effect of demographics and Chinese ethnicity on trading behaviour. The relationship between ethnic background and trading behaviour has not previously been studied in a multicultural market. Robust evidence of the disposition effect is found across different investor categories using a large sample of individual investor accounts at a leading local retail brokerage. However, the disposition effect is more prevalent in investors of Chinese background, as well as women and older investors. Further, other behavioural biases are found to be predictors of the disposition effect, including frequent trading, round size trading heuristics, and the investor's level of portfolio diversification.