scholarly journals An Experimental Economic Study of Loss Aversion in Stock Trading Decisions

2021 ◽  
Vol 9 (4) ◽  
pp. 417-429
Author(s):  
Thanchanok Aramrueng ◽  
Peera Tangtammaruk
Keyword(s):  
Loss Aversion ◽  
Choice Model ◽  
Disposition Effect ◽  
Stock Trading ◽  
Individual Measurement ◽  
Behavioral Bias ◽  
Experimental Economic ◽  
Trading Decisions ◽  
Set Up ◽  
Binary Choice Model

The disposition effect is a form of behavioral bias that tends to result in investors holding on to their losing stocks for too long and selling winning stocks too soon. It can be explained by the behavioral economics theory of loss aversion. Even though many have studied this kind of behavioral bias in a variety of different countries, none of them have investigated the disposition effect in the case of Thailand. Therefore, the main objective of our study is to test the disposition effect among Thais by applying the experimental economic approaches of Weber & Camerer (1998) and Odean (1998) whilst also including the findings from questionnaires and interviews. We set up a simulation stock trading market to test the disposition effect of participants regardless of whether they had stock trading experienced or not. Subjects were required to trade among six stocks in 14 trading periods. We also added three more periods to test how different types of news impacted the subjects’ trading decisions. In addition, we analyzed socioeconomic factors that affect disposition effect behavior by using an econometric binary choice model. We found that this experiment can exhibit the disposition effect of subjects in terms of overall and individual measurement. In normal stock trading situations, we found that over 70% of subjects showed clear signs of the disposition effect, which seemed to decrease after they received fictional news.

A binary choice model with partial observability for panel data

2020 ◽  
Vol 15 (4) ◽  
pp. 315-322
Author(s):  
Ekaterina Batalova ◽  
Kirill Furmanov ◽  
Ekaterina Shelkova
Keyword(s):  
Job Search ◽  
Latent Class ◽  
Choice Model ◽  
Maximum Likelihood Estimates ◽  
Binary Choice ◽  
Panel Model ◽  
Binary Response Variable ◽  
Monitoring Survey ◽  
Binary Choice Model ◽  
Time Invariant

We consider a panel model with a binary response variable that is a product of two unobservable factors, each determined by a separate binary choice equation. One of these factors is assumed to be time-invariant and may be interpreted as a latent class indicator. A simulation study shows that maximum likelihood estimates from even the shortest panel are much more reliable than those obtained from a cross-section. As an illustrative example, the model is applied to Russian Longitudinal Monitoring Survey data to estimate a proportion of the non-employed population who are participating in job search.

scholarly journals A regret-based route choice model with asymmetric preference in a stochastic network

2018 ◽  
Vol 10 (8) ◽  
pp. 168781401879323
Author(s):  
Lei Zhao ◽  
Hongzhi Guan ◽  
Xinjie Zhang ◽  
Xiongbin Wu
Keyword(s):  
Loss Aversion ◽  
Equilibrium Model ◽  
Choice Model ◽  
User Equilibrium ◽  
Stochastic User Equilibrium ◽  
Regret Minimization ◽  
Route Network ◽  
Travel Decision ◽  
Gains And Losses ◽  
Random Regret Minimization

In this study, a stochastic user equilibrium model on the modified random regret minimization is proposed by incorporating the asymmetric preference for gains and losses to describe its effects on the regret degree of travelers. Travelers are considered to be capable of perceiving the gains and losses of attributes separately when comparing between the alternatives. Compared to the stochastic user equilibrium model on the random regret minimization model, the potential difference of emotion experienced induced by the loss and gain in the equal size is jointly caused by the taste parameter and loss aversion of travelers in the proposed model. And travelers always tend to use the routes with the minimum perceived regret in the travel decision processes. In addition, the variational inequality problem of the stochastic user equilibrium model on the modified random regret minimization model is given, and the characteristics of its solution are discussed. A route-based solution algorithm is used to resolve the problem. Numerical results given by a three-route network show that the loss aversion produces a great impact on travelers’ choice decisions and the model can more flexibly capture the choice behavior than the existing models.

scholarly journals Loss Aversion and Consumption Choice: Theory and Experimental Evidence

2015 ◽  
Vol 7 (2) ◽  
pp. 101-120 ◽  
Author(s):  
Heiko Karle ◽  
Georg Kirchsteiger ◽  
Martin Peitz
Keyword(s):  
Experimental Evidence ◽  
Loss Aversion ◽  
Consumer Choice ◽  
Rational Expectations ◽  
Choice Theory ◽  
Choice Model ◽  
Reference Points ◽  
Price Uncertainty ◽  
Theoretical Predictions

We analyze a consumer-choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. Participants differ in their reported taste for the two sandwiches and in their degree of loss aversion, which we measure separately. We find that more-loss-averse participants are more likely to opt for the cheaper sandwich, in line with theoretical predictions. The estimates in the model with rational expectations are slightly more significant than those with naïve expectations. (JEL D11, D12, D84, M31)

scholarly journals Factors influencing bicycle use: a binary choice model with panel data

2017 ◽  
Vol 27 ◽  
pp. 253-260 ◽  
Author(s):  
Ana Barberan ◽  
João de Abreu e Silva ◽  
Andres Monzon
Keyword(s):  
Panel Data ◽  
Choice Model ◽  
Binary Choice ◽  
Factors Influencing ◽  
Binary Choice Model

scholarly journals The investment project pipeline: cost escalation, lead time, success, failure and speed

2011 ◽  
Vol 36 (3) ◽  
pp. 317-348 ◽  
Author(s):  
Kenneth W Clements ◽  
Jiawei Si
Keyword(s):  
Lead Time ◽  
Choice Model ◽  
Investment Project ◽  
Regulatory Reform ◽  
Lead Times ◽  
Index Number ◽  
Investment Projects ◽  
Binary Choice Model ◽  
Investment Process ◽  
Planning And Construction

As they involve expectations about the future and long lead times for planning and construction, the evolution of investment projects is usually complex and volatile. This paper analyses an important aspect of this volatility by studying the nature of the investment process, from the initial bright idea to the final construction and operational phase of a project. We refer to this process as the ‘project pipeline’. Using a rich source of information on recent Australian resource development projects, an index-number approach is employed to measure the escalation of costs of projects in the pipeline and the time spent there (the lead time). The determinants of the probability of ultimate success of projects is analysed with a binary choice model. Finally, a Markov chain approach is used to model the transitions of projects from one stage in the pipeline to the next, and to examine the implications of regulatory reform that have the effect of speeding up the flow of projects.

Sign in / Sign up

Export Citation Format

Share Document