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- W2059360963 abstract "The disposition effect has been characterized in various ways: the “effect, whereby investors are anxious to sell their winners, but reluctant to sell their losers” (Shefrin [2005] Shefrin, H. 2005. A Behavioral Approach to Asset Pricing, Amsterdam: Elsevier Academic Press. [Google Scholar], pp. 419); “the tendency to hold losers too long and sell winners too soon” (Odean [1998] Odean, T. 1998. “Are Investors Reluctant to Realize Their Losses?”. The Journal of Finance, 53: 1775–1798. [Crossref], [Web of Science ®] , [Google Scholar], pp. 1775) and the effect, whereby investors “sell winners more readily than losers” (Odean [1998] Odean, T. 1998. “Are Investors Reluctant to Realize Their Losses?”. The Journal of Finance, 53: 1775–1798. [Crossref], [Web of Science ®] , [Google Scholar], pp. 1779). The most discernable aspect of these characterizations is their imprecision, particularly with regard to time. In what follows, we provide a detailed explanation of the disposition effect based on a straightforward application of prospect theory (Kahneman and Tversky [1992]; Kahneman and Tversky [1979 Kahneman, D. and Tversky, A. 1979. “Prospect Theory: An Analysis of Decisions under Risk.”. Econometrica, 47: 263–291. [Crossref] , [Google Scholar], 2000 Kahneman, D. and Tversky, A. 2000. Choices, Values, and Frames, Cambridge: Cambridge University Press. [Crossref] , [Google Scholar]]). The analysis begins with the traditional account of the disposition effect (Shefrin and Statman [1985] Shefrin, H. and Statman, M. 1985. “The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence.”. Journal of Finance, 40: 777–790. [Crossref], [Web of Science ®] , [Google Scholar]) and provides precise time-independent concepts that replace “sell too soon” and “hold too long.” The analysis shows when the prospect theory explanation of the disposition effect requires only the valuation function and when the explanation requires both the valuation function and the probability weighting function." @default.
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- W2059360963 date "2008-03-12" @default.
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- W2059360963 title "A Detailed Prospect Theory Explanation of the Disposition Effect" @default.
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- W2059360963 doi "https://doi.org/10.1080/15427560801897758" @default.
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