Disposition Effect Of Individual Investors

As the second largest stock market in the world,china’s stock market has the largest size of Individual investors in the world.Therefore,it is crucial to explore and understand individual investors’ trading behavior in order to better research the stock market and capital market.In the hypothesis of the traditional financial theory,people are rational,but a large number of empirical research results point out that there are many phenomena in the stock market that cannot be explained by traditional theories.The research in this paper focuses on the disposition effect as one of the phenomena.From the micro-perspective of individual investors,adopt experimental analysis method to obtain useful findings and conclusions through laboratory experiments.Specifically,this paper conducts a transaction experiment to observe the behavior of the subjects’ stock trading and a comparative questionnaire experiment to determine the disposition effect of subject.Through research and analysis,it was found that:(1)59%of the subjects showed a disposition effect behavior in experiment,which supported the view that most individual investors in the stock market of China had a disposition effect behavior.In addition,27%of the subjects showed behavior contrary to the disposition effect,indicating that although the disposition effect is widespread,the difference between individuals is still relatively large.Using the measurement results to compare the differences between investors found that female subjects showed a higher proportion of disposition effects than men.(2)Combining the basic value of stocks,examining the rational situation of disposition effect behaviors,discovering that disposition effects are not all irrational,with truly irrational behavior accounting for about 44%,and the remaining 56%were conditional.(3)Starting with the most basic conclusions of the hybrid distribution hypothesis,a linear model including disposition effects was constructed in combination with the experimental context.The regression results showed that the effect of disposition effects on yields was reversed.When the stock price rose,it tended to sell.Out of profitable stocks,selling too many profitable stocks has limited the further rise in stock prices.When the stock price falls,it tends to continue to hold the stock,which can restrain the stock price from continuing to fall.Therefore,from the perspective of the volatility of stock price,the tendency of disposition effect will reduce the volatility of stock price to some extent.