Prospect theory and institutional investors
There is ample evidence that past performance affects the trading decisions of individual investors. This paper looks at this issue using a detailed database of currency trading decisions of institutional investors. Past performance manifestly affects currency risk-taking in this group, but the sign...
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| Main Authors: | , |
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| 格式: | text |
| 語言: | English |
| 出版: |
Institutional Knowledge at Singapore Management University
2003
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| 主題: | |
| 在線閱讀: | https://ink.library.smu.edu.sg/lkcsb_research/5231 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6230/viewcontent/SSRN_id457741__1_.pdf |
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| 機構: | Singapore Management University |
| 語言: | English |
| 總結: | There is ample evidence that past performance affects the trading decisions of individual investors. This paper looks at this issue using a detailed database of currency trading decisions of institutional investors. Past performance manifestly affects currency risk-taking in this group, but the sign and magnitude of the effect runs counter to much of the existing theory and evidence. There is no evidence whatsoever of disposition effects; rather, the dominant characteristic is aggressive risk reduction in the wake of losses. This effect is more prominent later in the year, and among older and more experienced funds. A modified version of the loss aversion model of Barberis, Huang and Santos (2001) offers the best hope of adequately accounting for the observed behavior. |
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