A Heterogeneous Model of Disposition Effect
Resource
Applied Economics 38 (18): 2147-2157
Journal
Applied Economics
Journal Volume
38
Journal Issue
18
Pages
2147-2157
Date Issued
2006
Date
2006
Author(s)
Yu, H.-Y.
Abstract
A portfolio choice model is provided to illustrate the disposition effect under irrational belief in mean reversion assumption. Higher cognitive reference, stronger irrational belief in mean reversion magnitude and less risk aversion all strengthen the disposition effect in the model. The equilibrium market interest rate is priced after the market clearing condition is employed. The grater disposition effect reduces the capital mobility from the stock market to the bond market and thus mitigates the dropping of the market interest rate.
SDGs
Other Subjects
capital flow; interest rate; market conditions; model; stock market
Type
journal article