Volume 7, Issue 1, February 2018, Page: 1-6
The Escalation of Commitment and Disposition Effect in Securities Trading: An Experimental Study
Gao Kai, School of Business, Nanjing Normal University, Nanjing, China; Jiangsu Vocational College of Agriculture and Forestry, Zhenjiang, China
Jia Chen, School of Business, Nanjing Normal University, Nanjing, China
Nie Lei, School of Business, Nanjing Normal University, Nanjing, China
Received: Dec. 25, 2017;       Accepted: Jan. 11, 2018;       Published: Jan. 23, 2018
DOI: 10.11648/j.ijber.20180701.11      View  1853      Downloads  142
Abstract
This paper investigates the relationship between disposition effect and escalation of commitment in securities trading. First, we developed an investment simulation system, that manipulated five stocks' price during thirty-six periods to test investors' behavioral patterns in securities trading. Then, we investigate whether the gain ratio or loss ratio impacts on disposition effect and escalation of commitment after controlling other variables. The results summarized as follow: First, investors are exhibited disposition effect and escalation of commitment in securities trading. Second, sex, education, duration of securities trading, and investment amount did not affect the disposition effect and escalation of commitment. Third, disposition effect and escalation of commitment has negative impact on performance. Finally, we find individual investors with stronger disposition effect are more likely to be escalated in securities trading.
Keywords
Escalation of Commitment, Disposition Effect, Prospect Theory
To cite this article
Gao Kai, Jia Chen, Nie Lei, The Escalation of Commitment and Disposition Effect in Securities Trading: An Experimental Study, International Journal of Business and Economics Research. Vol. 7, No. 1, 2018, pp. 1-6. doi: 10.11648/j.ijber.20180701.11
Copyright
Copyright © 2018 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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