Disposition effect : a study of NTU undergraduates.

• Main Authors: Ng, Wee Hong., Phang, Kay Heng., Tan, Shi Cong.
• Other Authors: Chen, Geraldine Yee Fong
• Format: Final Year Project
• Published: 2008
• Subjects: DRNTU::Business::Finance::Investments
• Online Access: http://hdl.handle.net/10356/8554
• Institution: Nanyang Technological University

We investigate using NTU undergraduates as our sample, the disposition effect, which is the tendency to sell “winners” too early and hold “losers” too long. We also introduced the use of respondents’ reference prices as another avenue to evaluate the stocks, apart from using the purchase price. Overall, NTU undergraduates display the disposition effect when purchase price is used, but did not surface when reference price is used, suggesting that reference prices might change due to stock price movements. Our analysis also reveals a surprising result that NBS students do not display the disposition effect when both purchase and reference prices are used to evaluate the stocks. However, Non-NBS students do exhibit the disposition effect. A risk tolerance assessment was conducted and classified our respondents into “Low Risk”, “Moderate Risk” and “High Risk” tolerances. We also examine the relationship between the behaviors respondents claim in the assessment, as well as their actual behavior in the stock simulation game. Only respondents in the “Low Risk” category display congruent results between their assessment and behaviors revealed from the simulation. We conclude by exploring possible explanations why some respondents do not display the disposition effect, and present highlights for future research.