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 2021 , ' Investment transparency and the disposition effect ' , European Financial Management , vol. Early View . https://doi.org/10.1111/eufm.12329
Publication
European Financial Management
Status
Peer reviewed
ISSN
1354-7798Type
Journal article
Rights
Copyright © 2021 John Wiley & Sons Ltd. This work has been made available online in accordance with publisher policies or with permission. Permission for further reuse of this content should be sought from the publisher or the rights holder. This is the author created accepted manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1111/eufm.12329
Description
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
Items in the St Andrews Research Repository are protected by copyright, with all rights reserved, unless otherwise indicated.