Demystifying disposition effect: past, present and future
Qualitative Research in Financial Markets
ISSN: 1755-4179
Article publication date: 27 February 2023
Issue publication date: 16 January 2024
Abstract
Purpose
The disposition effect remains one of the most significant investor behavior puzzles. This study aims to consolidate the knowledge, explore current dynamics, elicit trends and offer future research directions to demystify the disposition effect.
Design/methodology/approach
This study applies the hybrid review method. It first used bibliometric analysis (212 documents), followed by content analysis (54 articles) to analyze the breadth and depth of literature on the disposition effect.
Findings
This study presents performance analysis and science mapping. It identifies five main research streams: evidence, implications and mitigation techniques; theoretical explanations; investor biases and hedonic framing; attributes, beliefs and preferences; and implications for asset pricing and market efficiency. This study further offers future research directions for disposition effect research.
Research limitations/implications
This study deploys sequential bibliometric and content analysis. A meta-analysis of quantitative articles could provide specific insights regarding the disposition effect. Besides, this study is based on Scopus-indexed journals only.
Practical implications
This study benefits investors and portfolio managers as they learn effective ways to guard against the disposition effect. Policymakers may tweak tax laws to incentivize long-term holding, and regulators can run investor education campaigns to minimize the disposition effect’s consequences effectively.
Originality/value
To the best of the authors’ knowledge, this is probably the first hybrid review of high-quality, contemporary articles on the disposition effect that offers science mapping, research streams, future research directions and a succinct summary of theories, contexts, characteristics and methods deployed in the field of research.
Keywords
Acknowledgements
Declaration of competing interest: The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Citation
Joshipura, M., Joshipura, N. and Sharma, A. (2024), "Demystifying disposition effect: past, present and future", Qualitative Research in Financial Markets, Vol. 16 No. 1, pp. 32-59. https://doi.org/10.1108/QRFM-07-2022-0114
Publisher
:Emerald Publishing Limited
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