Culture and the disposition effect

Breitmayer, Bastian; Hasso, Tim; Pelster, Matthias

doi:10.1016/j.econlet.2019.108653

Cited by 12 publications

(6 citation statements)

References 9 publications

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“…Taking a closer look at the cultural drivers of DEs in these three geographies, we find Hofstede's cultural dimensions to be especially relevant (Hofstede, 2001). In this regard, the finding in Breitmayer et al (2019) that long-term orientation is negatively-correlated with susceptibility to the DE is applicable; particularly when considering both the facts that (1) Germans score more than twice as high as South Africans and Brazilians (on average) in the long-term orientation (Hofstede Insights, 2021), and (2) women have been shown to generally score higher than men in long-term orientation (AlAnezi and Alansari, 2016). The conjecture that flows from this is thatlike Brazilian investors -South African investors exist within a cultural context where long-term orientation is valued relatively lowly, which in turn renders South African investors prone to the DE across the gender-divide (a mechanism which also explains our findings in relation to H1).…”

Section: Discussion and Concluding Remarksmentioning

confidence: 93%

Section: Discussion and Concluding Remarksmentioning

confidence: 99%

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The disposition effect and its manifestations in South African investor teams

Shandu

Alagidede²

2022

RBF

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PurposeThe study endeavours to determine (1) whether the disposition effect exists among South African investor teams, (2) whether it is causally intensified by a set of psychosocial factors and (3) whether the disposition effect causally reduces investor welfare.Design/methodology/approachFollowing a natural field experimentation design involving a sample of investor teams participating in the 2019 run of the JSE University Investment Challenge, the authors use regression adjustments as well as bootstrap tests to investigate the casual implications of a set of psychosocial factors on the intensity of the disposition effect, as well on the attenuation of market-adjusted ex post returns (i.e. investor welfare).FindingsSouth African investor teams are susceptible to the disposition effect, and their susceptibility to the bias is associated with attenuated investor welfare. Furthermore, low female representation in an investor team causally intensifies the disposition effect, subsequently leading to a causal reduction in investor welfare.Originality/valueUsing evidence from real-world observation, the authors contribute to the literature on team gender diversity and investment decision-making, and – using Hofstede's (2001) cultural dimensions – the authors offer a comprehensive account for how differences in culture may lead to differences in gender-related disposition effects across different nationalities. The authors also introduce to the literature experimental evidence from the field that clearly demonstrates that – among South African investor teams – a causal relationship exists (1) between female representation and the disposition effect, and (2) between the disposition effect and investor welfare.

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Section: Discussion and Concluding Remarksmentioning

confidence: 93%

Section: Discussion and Concluding Remarksmentioning

confidence: 99%

The disposition effect and its manifestations in South African investor teams

Shandu

Alagidede²

2022

RBF

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“…First, existing research on the disposition effect is conducted using data from a single country, and there is a lack of multicountry or comparative studies. Literature shows an active role of personality traits (Ahmad, 2020), culture (Breitmayer et al , 2019) and domestic versus foreign investors (Hincapié-Salazar and Agudelo, 2020) in investment decisions, which makes it critical to have multicountry studies to generalize the findings. Studies focusing on different geographies will provide better evidence of the personality traits of investors and the role of culture, regulatory bodies and macroeconomic factors in explaining the disposition effect across the various markets.…”

Section: Research Gaps and Directions For Future Researchmentioning

confidence: 99%

Shed old baggage and invest wisely. A bibliometric and thematic analysis of disposition effect and investment

Mundi

Vashisht

2023

QRFM

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Purpose This paper aims to review, systematize and integrate existing research on disposition effect and investments. This study conducts bibliometric analysis, including performance analysis and science mapping and thematic analysis of studies on disposition effect. Design/methodology/approach This study adopted a thematic and bibliometric analysis of the papers related to the disposition effect. A total of 231 papers published from 1971 to 2021 were retrieved from the Scopus database for the study, and bibliometric analysis and thematic analysis were performed. Findings This study’s findings demonstrate that research on the disposition effect is interdisciplinary and influences the research in the domain of both corporate and behavioral finance. This review indicates limited research on cross-country data. This study indicates a strong presence of work on investor psychology and behavioral finance when it comes to the disposition effect. The findings of thematic analysis further highlight that most of the research has focused on prospect theory, trading strategies and a few cognitive and emotional biases. Practical implications The findings of this study can be used by investors to minimize their biases and losses. The study also highlights new techniques in machine learning and neurosciences, which can help investment firms better understand their clients’ behavior. Policymakers can use the study’s findings to nudge investors’ behavior, focusing on minimizing the effects of the disposition effect. Originality/value This study has performed the quantitative bibliometric and thematic analysis of existing studies on the disposition effect and identified areas of future research on the phenomenon of disposition effect in investments.

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“…Finally, and most significantly, culture is largely approached as a geographical matter and not analyzed in terms of its differentiable dimensions. Some studies connect research findings to available index values from Hofstede’s research and provide correlations between findings (for example, see [ 8 , 9 , 10 ]). Yet, only a minority of studies specifically collect data on cultural dimensions from participants [ 11 ], creating opportunity for deviations.…”

Section: Introductionmentioning

confidence: 99%

The Influence of Culture on the Lure of Choice, Mental Accounting, and Overconfidence

Hoffmann,

Anwar

2024

Behavioral Sciences

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In the contemporary globalized landscape characterized by international and intercultural decision-making processes, interconnected supply chains, and diverse customer relations, susceptibility to biases and heuristics poses a substantial threat to the efficiency of decision making. This research explores the relatively understudied influence of culture on individuals’ susceptibility to concepts derived from behavioral economics. Employing the Individual Cultural Values Scale (CVSCALE), we examine the impact of culture on the allure of choice, mental accounting, and overconfidence among 837 participants from Australia (AU), China (CN), Germany (GE), and the United States (US) through logistic regression analysis. At the individual level, discernible interactions between power–distance, allure of choice, and overconfidence are observed. On the national scale, power–distance (AU, US), uncertainty avoidance (US), and masculinity (CN) significantly impact the allure of choice, while overconfidence is influenced by power–distance (US) and masculinity (US). Our analysis shows that culture plays a pivotal role in shaping susceptibility to biases and heuristics, thereby influencing decision-making processes. The findings advocate for a culturally differentiated approach to behavioral economics, emphasizing the need to tailor strategies and interventions based on cultural nuances.

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Culture and the disposition effect

Cited by 12 publications

References 9 publications

The disposition effect and its manifestations in South African investor teams

The disposition effect and its manifestations in South African investor teams

Shed old baggage and invest wisely. A bibliometric and thematic analysis of disposition effect and investment

The Influence of Culture on the Lure of Choice, Mental Accounting, and Overconfidence

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