Transparency and Investment Decisions: Evidence from the Disposition Effect

Marcel Lukas, Arman Eshraghi, Jo Danbolt

Research output: Contribution to conferencePaper

Abstract

The wealth-diminishing tendency of investors to forgo loss realization in favor of gain realization, known as the disposition effect, is considerably lower in a transparent trading environment. Using proprietary data from a social trading platform, we analyze individual trades as portfolios become publicly visible in multiple stages. Findings show that the disposition effect diminishes about 35% when trades and holdings are unhidden, and this is robust to alternative explanations. Inter alia, we identify the impact of ‘transparency culture’ on trading behavior through differences between the former West and East Germany in light of the latter’s historical exposure to state surveillance.
Original languageEnglish
Publication statusPublished - 9 Jun 2018
EventBehavioral Decision Research in Management Conference 2018 - Harvard Business School, Boston, United States
Duration: 7 Jun 20189 Jun 2018

Conference

ConferenceBehavioral Decision Research in Management Conference 2018
Abbreviated titleBDRM 2018
CountryUnited States
CityBoston
Period7/06/189/06/18

Keywords

  • Disposition Effect
  • Transparency
  • Social Trading
  • Fund Management
  • Portfolio Disclosure

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  • Cite this

    Lukas, M., Eshraghi, A., & Danbolt, J. (2018). Transparency and Investment Decisions: Evidence from the Disposition Effect. Paper presented at Behavioral Decision Research in Management Conference 2018, Boston, United States.