| Summary: | 碩士 === 輔仁大學 === 金融與國際企業學系金融碩士班 === 99 === Investors＇tendency of selling winners prematurely while holding losers at a delayed basis, an implication derived from the prospect theory of Kahneman and Tversky (1979), is dubbed as the disposition effect by Shefrin and Statman (1985). The phenomenon has received extensive supports from previous studies (e.g. Benartzi and Thaler (1995), Odean (1998), Lin (2002) ). However, most of the findings are based on stock investment by individual investors. It is an interesting issue to explore whether the effect applied to fund investors. We focus on installment fund investors due to the reason that installment investors are less affected by the sunk cost effect or mental account, and that active traders are more readily to update their reference price to the market price and therefore less subject to the disposition effect (Dhar, R. & Zhu, N. (2002)). If the result is in supportive of the disposition effect, the effect is likely to be applicable to all investors.
Empirical results show that Taiwan mutual fund investors indeed exhibit the disposition effect. We further analyze the average ex-post returns and find the ex-post returns of paper losses are lower than those of realized winners. The analysis is further breakdown by years and months. Exceptions are found in the periods before 2006 and in October and November. Moreover, we find that the disposition effect is only sustainable in the normal price zones. An up-close look of individual characteristics we find that the disposition effect is stronger for unmarried individuals while weaker for investors with a large buy/sell ratio. Our finding is helpful in extending the external validity of the disposition effect.
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