The Consumption Effects of the Disposition to Sell Winners and Hold Losers

Fully Closed: Individual Responses to Realized Gains and Losses

“…Our data set stems from one of the largest online banks in Germany. 5 The data contain daily information on the logins (from 2012 onward), trades, and portfolio holdings of the bank's customers as well as all the balances and transactions of each investor's checking, savings, and settlement accounts with the 4 Related to our findings for paper gains and losses, An et al (2019) find that the disposition effect is more pronounced when the portfolio trades at a loss, which is in line with Bernard, Loos, and Weber (2018) and Loos, Meyer, and Pagel (2018), who show that the disposition effect is more pronounced after busts than in boom markets. 5 As of 2016, the five largest online banks without branch representation (Direktbanken ohne Filialnetz) in Germany are as follows: ING-Diba (8.3 million customers), Deutsche Kreditbank (3.3 million), Comdirect (2.1 million), Volkswagen Bank (1.1 million), and Mercedes-Benz Bank (1.1 million).…”

“…In our sample of 99,231 German investors over the 2003 to 2016 period, we also find an attenuated disposition to sell winning mutual funds. In some periods the disposition effect for mutual funds is positive, while for other periods it is negative (see Loos, Meyer, and Pagel, 2018). It could be the case that individuals blame themselves for a liquidation but blame the manager for performance.…”

“…Meyer, Pagel, and Previtero (2018) find that individuals consume, on average, 10% out of forced liquidations, which is an amount much higher than the marginal propensity to consume out of unrealized capital gains and closer to the amount provided out of dividends (Baker, Nagel, and Wurgler, 2007;Di Maggio, Kermani, and Majlesi, 2020). Using the same data and a natural experiment in which the purchase prices of funds in individual investors' portfolios changed, Loos, Meyer, and Pagel (2018) document that individuals tend to sell and consume fictitious winners, that is, funds that are actually losing investments but are displayed as winning investments.…”

Attention‐Induced Trading and Returns: Evidence from Robinhood Users

“…This finding fits into the emerging literature that emphasizes that the display of information affects investor behavior. Changes in the display of price information affect investors’ willingness to sell winners versus losers in individual stocks and mutual funds (Frydman and Wang (2020), Loos, Meyer, and Pagel (2020)). News that investors consume about stocks often confirms their prior beliefs (Cookson, Engelberg, and Mullins (Forthcoming)), and its prominence affects the incorporation of information (Fedyk (2019)).…”

Who Falls Prey to the Wolf of Wall Street? Investor Participation in Market Manipulation

“…First and foremost, we present novel trade-level evidence on investor trading in manipulated stocks. Individual investor data are rare and prior research using such data primarily characterizes investment biases (e.g., Odean 1999; Odean 2000, 2013;Schmittmann et al 2014;Fecht et al 2017;Loos et al 2020). We show that participation in pump-and-dump schemes is fairly common and that individual and aggregate losses are considerable.…”