Investment transparency and the disposition effect
Abstract
The disposition effect is lower in a trading environment with salient information on current holdings. Using proprietary data from a European fintech platform for social trading, we analyze variation in trading behavior within and between private and publicly-visible portfolios. The disposition effect diminishes by about 35% when trades and holdings become public. We find the level of transparency and the way financial information is illustrated can influence trading decisions. Our results suggests that requiring greater transparency from portfolio managers can reduce trading bias.
Citation
Danbolt , J , Eshraghi , A & Lukas , M 2022 , ' Investment transparency and the disposition effect ' , European Financial Management , vol. 28 , no. 3 , pp. 834-865 . https://doi.org/10.1111/eufm.12329
Publication
European Financial Management
Status
Peer reviewed
ISSN
1354-7798Type
Journal article
Description
Funding: Jo Danbolt holds the Baillie Gifford Chair in Financial Markets, and his research is partially funded by a Baillie Gifford endowment held by the University of Edinburgh Business School.Collections
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