Are investors reluctant to realize their losses-英文文献.pdf

THE JOURNAL OF FINANCE • VOL. LIII, NO. 5 • OCTOBER 1998 Are Investors Reluctant to Realize Their Losses? TERRANCE ODEAN* ABSTRACT 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 performance. For taxable investments, it is suboptimal and leads to lower after-tax returns. Tax-motivated selling is most evident in December. THE TENDENCY TO HOLD LOSERS too long and sell winners too soon has been labeled the disposition effect by Shefrin and Statman 1985. For taxable investments the disposition effect predicts that people will behave quite dif- ferently than they would if they paid attention to tax consequences. To test the disposition effect, I obtained the trading records from 1987 through 1993 for 10,000 accounts at a large discount brokerage house. An analysis of these records shows that, overall, investors realize their gains more readily than their losses. The analysis also indicates that many investors engage in tax- motivated selling, especially in December. Alternative explanations have been proposed for why investors might realize their profitable investments while retaining their losing investments. Investors may rationally, or irrationally, believe that their current losers will in the future outperform their current * University of California, Davis. This paper is ba