Investment transparency and the disposition effect

Jo Danbolt, Arman Eshraghi, Marcel Lukas*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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.
Original languageEnglish
Pages (from-to)834-865
Number of pages32
JournalEuropean Financial Management
Volume28
Issue number3
Early online date29 Jul 2021
DOIs
Publication statusPublished - 1 Jun 2022

Keywords

  • Disposition effect
  • Transparency
  • Social trading
  • Fund management

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