Evidence Contrary to the Disposition Effect Amongst UK Managed Funds
32 Pages Posted: 4 Mar 2005
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: Suggested Citation
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