Evidence Contrary to the Disposition Effect Amongst UK Managed Funds

32 Pages Posted: 4 Mar 2005

See all articles by Raymond da Silva Rosa

Raymond da Silva Rosa

The University of Western Australia - Department of Accounting and Finance; Financial Research Network (FIRN)

Huong Minh To

University of Western Australia - Business School

Terry S. Walter

University of Sydney; University of Technology, Sydney - School of Finance and Economics; Financial Research Network (FIRN)

Date Written: February 2005

Abstract

We investigate the prevalence of the disposition effect (DE) amongst UK managed fund by using the Citywatch database of their daily holding positions in all equity stocks over the period September 2001 through to September 2004. In contrast to Odean's (1998) finding for clients of a discount brokerage house, we find that at once stock's capitalisation is taken into account UK managed funds tend to sell losers rather than winners. The most influential variable shaping funds' propensity to sell a stock is its market capitalisation, a proxy for liquidity. Other significant variables positively correlated with the sell decision include market-to-book ratio and recent performance of the stock. UK funds tend to sell stocks that have had a recent reduction in price. We conclude UK managed funds do not exhibit the behavioural bias associated with the DE.

Keywords: Disposition effect, managed funds, size effect

JEL Classification: G12, G23, G4

Suggested Citation

da Silva Rosa, Raymond and To, Huong Minh and Walter, Terry Stirling, Evidence Contrary to the Disposition Effect Amongst UK Managed Funds (February 2005). Available at SSRN: https://ssrn.com/abstract=676342 or http://dx.doi.org/10.2139/ssrn.676342

Raymond Da Silva Rosa (Contact Author)

The University of Western Australia - Department of Accounting and Finance ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Huong Minh To

University of Western Australia - Business School ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

Terry Stirling Walter

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

University of Technology, Sydney - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
+61 2 9514 3860 (Phone)
+61 2 9514 7711 (Fax)

HOME PAGE: http://datasearch.uts.edu.au/business/finance/staff/StaffDetails.cfm?UnitStaffId=5373

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au