On Cognitive Dissonance and Disposition Effect：The Case on Taiwan Stock Investors

• Main Authors: Cheng-Da Yuan, 袁正達
• Other Authors: Min-Hua Kuo
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/55954651265691435314

碩士 === 世新大學 === 財務金融學研究所(含碩專班) === 93 === In Behavior Finance, Disposition effect is the most important behavioral bias that has been widely supported by empirical studies. The trading asymmetric between gain and loss area have negative effect on investing performance. However, the driving forces of Disposition effect are not well recognized. It is highly probable that some of the disposition-effect investors are actually out of “rational” judgment. If so, the existing claims of the strong evidence supporting disposition effect may be exaggerated. We propose the Cognitive Dissonance and Coping Theory as the hypothetical reasons and try to find out how many and who prefer “rational” strategy, and how many and who prefer “irrational” strategy. To avoid the methodology limitations as the sample selection error in experimental designs and borrowing account data from a certain private trading house, as well as indirect inference from market data such, we adopt large scale questionnaire survey, targeting the individual investors in Taiwan stock market. The evidence shows that when face Cognitive Dissonance, 72% investors continue buying or holding the “loser stocks”, only a few investors modify their investing strategy and choose selling them to reduce Cognitive Dissonance. Females are found more likely to insist their belief. In our sample, there are 325 investors have Disposition Effect, and merely 60 are “irrational”. It demonstrates that the Disposition Effect is indeed overestimated, since the individual rational expectation was not taken into consideration. As for the investment performance, investors who subject to irrational disposition-effect get poor return than those modifying strategies. Finally, Heckman two stage model shows that the investors of elder, well-educated, female individuals are tend to have Disposition Effect.