This paper finds that the disposition effect, well-known in many financial markets, exists in the closed-end fund market, where fundamental values are known, yet the magnitude of the effect varies with the adoption of different reference points. Using the prospect theory explanation to this...

The disposition effect refers to the investors' tendency to disproportionately sell more winning than losing assets. This experiment evaluates its two competing behavioral mechanisms: belief in mean reversion and prospect theory. The participants were endowed with some hypothetical assets,...

How does memory shape individuals' financial decisions? We find experimental evidence of a self-serving memory bias. Subjects over-remember their own positive investment outcomes and under-remember negative ones. In contrast, subjects who did not invest but merely observed outcomes do not have...

Growing evidence shows that biological factors affect individual financial decisions that could be reflected in financial markets. Testosterone, a chemical messenger especially influential in male physiology, has been shown to affect economic decision making, and is taken as a...