A Research On Disposition Effect And Investors' Characters

Standard (modern) finance is based on rationality assumption and efficient market hypothesis (EMH).Its a theoretical system about how to price different securities under the condition of best portfolio of securities and capital market equilibrium. From the center of 20th century, standard finance has established the leading role in finance field. But in the 1980s, there were lots of empirical researches which are contrary to standard finance, some researchers found modern finance model are unable to explain some anomalies and investors' decision-making behavior in security market, for example, overreaction and underreaction, scale effect, season effect, disposition effect and small firm effect and so on. Behavior Finance is brought under the condition of challenges and oppugns against standard finance. In the process of research on investors' financial behaviors, behavior finance reasonably introduced psychologic analysis, successfully explained the irrationality financial decisions of investors. It provides more practical guidance to financial investment.With the object of China stock market, this paper did some empirical researches on disposition effect from the prospective of behavior finance. We mainly discussed the three following issues:(l) Is disposition effect exists in China stock market? What are the primary reasons for disposition effect? (2) How is the extent of the abnormity? Are there any dynamic change characteristics? (3) Are there any relation between the disposition effect and investors' characters? In other words, are there any differences on disposition effect among different types of investors?To solve the problems above, this paper used the client and exchange database of HAITONG security exchanges in Chengdu and Chongqing from May 2000 to March 2005. After classified the investors in different dimensions, including sex, type (individual or institutional investor), age and investing age, the paper did some existence tests of disposition effect in China stock market. The results are as follows:There is distinct disposition effect in China stock market, and the tendency of holding the loser while selling the winner is kind of continuity, it isn't weaken with the capital market development. At the same time, there is significant disposition effect among all the months, and there is a gradual deepening trend from January to December. The analysis on disposition effect of investors with different sex shows: There are significant disposition effect among both male and female investors, but the male investors' trade behavior is more frequent than female, while the female investors are more inclined to sell the winners and hold the losers. The analysis on disposition effect of different types of investors indicates: there exist significant disposition effect for both individual and institutional investors, and there is no obvious discrepancy between them; For different age periods, the indexes of PGR and PLR are lowest for the old and highest for the young, which reflects the trade behavior of the young are more frequent; Although there exists significant disposition effect among investors of the three age periods, the effect of the young is weakest while the old is strongest; For investors of different investing age(>10years;5-10 years and <5 years),the empirical analysis shows: there are no distinct discrepancy between the three groups. All of them reflect significant disposition effect.In conclusion, the paper believes: the disposition effect in China stock market is kind of popularity, continuity and tendency, which means the investors with different characteristics are generally inclined to sell the winners and hold the losers, but there may be some discrepancy for different seasons, sexes and age periods.