Are Investors Reluctant to Realize Their Losses?

  title={Are Investors Reluctant to Realize Their Losses?},
  author={Terrance Odean},
  journal={Behavioral \& Experimental Finance},
  • Terrance Odean
  • Published 1 November 1996
  • Economics
  • Behavioral & Experimental Finance
I test the disposition effect, the tendency of investors to hold losing investments too long and sell winning investments too soon, by analyzing trading records for 10,000 accounts at a large discount brokerage house. These investors demonstrate a strong preference for realizing winners rather than losers. Their behavior does not appear to be motivated by a desire to rebalance portfolios, or to avoid the higher trading costs of low priced stocks. Nor is it justified by subsequent portfolio… 

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