In this episode of Financial Decoder, host Mark Riepe, head of the Schwab Center for Financial Research study, examines the mental forces that affect a common investing decision: What should you sell?
Financiers frequently spend a great deal of time and energy trying to choose which investments are the best to purchase. But what about when it is time to offer? In this episode of Financial Decoder, Mark shares what the research study tells us about the psychology of the sell decision. Choosing to keep or to sell a stock or other financial investment can be complicated since of something called the disposition effect. Joining Mark in the conversation is Omar Aguilar, primary investment officer for equities at Charles Schwab Financial Investment Management (), who speaks about the method professional cash supervisors work to alleviate behavioral and cognitive predispositions.
– One study, taking a look at real brokerage accounts of person
investors, found that stocks with a latent gain are 50% more
likely to be offered than stocks with a latent loss. For more
info on this research study see "Are Investors Reluctant to Realize
Their Losses?" from The Journal of Finance.
– Another research study found that when stocks are inherited, the personality effect is half as big as
it is when stocks are bought by the financier. You can learn more
about this research study from the Journal of Behavioral Choice Making.
– Mark likewise goes over using stop loss orders to reduce the disposition
result. This was studied in information by researchers in the European
Journal of Finance.
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