Empirical study on disposition effect of Bangladeshi investors

This research investigates the tendency of emerging market investors to hold losers too long and sell winners too soon. I calculate 125 individual investors' daily transactions using a large brokerage account database between 2011 and 2016 in Bangladesh. The results demonstrate that investors at aggregate level as well as individual level in Bangladesh have a historical preference for realizing their winning investments more than their losing ones. Individual investors realize their gains 1.6 times more than their losses. This study also tests the disposition effect of traders on the basis of frequency, gender and average rate of return and then judges the role of investors' personal characteristics on trading behavior. Bangladeshi investors are highly suffering from disposition effect, making poor trading decisions and their tendency towards disposition effect is not motivated by influencing factor like portfolio rebalance.

individual investor

disposition effect

investors' characteristics

sophistication