Gathergood, J., Loewenstein, G., Quispe-Torreblanca, E., & Stewart, N. (2019). Investor attention, reference points and the disposition effect. Available at SSRN: https://ssrn.com/abstract=3422790

Using login data from an online trading brokerage, we test whether investors have a greater propensity to sell assets when they have made a gain rather than a loss relative to the price at their latest login to their account. This disposition effect on returns since latest login exists alongside the widely-documented disposition effect on returns since purchase. We also show a strong interaction effect: investors tend to hold on to stocks that have made either a negative return since latest login or a negative return since purchase. Even a small loss since latest login annuls the disposition effect of a much larger gain since purchase. We interpret these findings in a Prospect Theory inspired model of realization utility with enhanced loss aversion.

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