Abstract
This paper details an experiment designed to explore the trading behaviors of investors that result from psychological biases and social interactions. In total, 88 investors were tracked for 6 months and 40,795 transactions were recorded. The research conducted an experimental survey and estimated a system analysis model to generate several important conclusions. First, the degree of regret bias and the disposition effects are unrelated, probably because the professional training of investors and the disposition effects are not significantly related. Second, if investors are affected by contradictions arising from their decisions, then the likelihood that they will sell a stock will decrease as the investor relationships in the community improve and the regret bias increases. Third, male investors prefer to trade derivatives, and even after controlling for the degree of regret bias, this preference is still significant.
Highlights
Understanding investors’ trading behaviors is a common focus for both the financial industry and financial economic research
The first objective of this study was to demonstrate a relationship between the regret bias effect and the disposition effect in order to explore the influence of psychological bias on transaction behavior
The disposition effect was calculated by referring to Weber and Camerer’s study, which used the α coefficient as a proxy for the disposition effect; α was calculated according to the following equation:/(the number of shares sold at a profit + the number of shares sold at a loss) [38]
Summary
Understanding investors’ trading behaviors is a common focus for both the financial industry and financial economic research. Many factors that affect investor trading have been previously identified, such as the use of momentum strategies for buying or selling securities [1] [2] and asset allocation, which is a strategy that is frequently recommended by the investor community [3] [4] [5] [6]. The relationships among these variables and the impacts of their interactions on investors’ trading behaviors and asset allocation are interesting but difficult to study
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