How Does Learning and Education Help to Overcome the Disposition Effect?

Abstract

The paper assesses how different types of learning affect the disposition effect. We distinguish between “baseline learning abilities”, “learning by doing” and “learning about one’s abilities”, differences in which emerge clearly from our exhaustive NASDAQ OMX Tallinn dataset. We employ survival analysis to show that stronger learning abilities as measured by education level and the type of education lessen the disposition effect. Stronger overall learners also learn faster by trading. We find that mathematical abilities are beneficial and learning abilities are more important than general mental abilities (measured by standardised academic exams) for overcoming the disposition effect.

Keywords: disposition effect, learning by doing, learning abilities, mental abilities, education

JEL Classification: G02, G11