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Published November 2014 | Accepted Version + Supplemental Material + Submitted
Journal Article Open

Debiasing the disposition effect by reducing the saliency of information about a stock's purchase price


The disposition effect refers to the empirical fact that investors have a higher propensity to sell risky assets with capital gains compared to risky assets with capital losses, and it has been associated with low trading performance. We use a stock trading laboratory experiment to investigate if it is possible to reduce subjects' tendency to exhibit a disposition effect by making information about a stock's purchase price, and thus about capital gains and losses, less salient. We compare two experimental conditions: a high-saliency condition in which the purchase price of a stock is prominently displayed by the trading software, and a low-saliency condition in which it is not displayed at all. We find that individuals exhibit a disposition effect in the high-saliency condition, and that the effect is 25% smaller in the low-saliency condition. This suggests that it is possible to debias the disposition effect by reducing the saliency with which information about a stock's purchase price is displayed on financial statements and online trading platforms.

Additional Information

© 2014 Elsevier B.V. Received 16 February 2013; Received in revised form 24 January 2014; Accepted 26 January 2014; Available online 5 February 2014. Financial support from NSF Economics, DRSM and IGERT and the Lipper Foundation is gratefully acknowledged.

Attached Files

Accepted Version - nihms667204.pdf

Submitted - SSRN-id2212494.pdf

Supplemental Material - mmc1.docx


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October 20, 2023