Disposition effect in the Finnish market : an empirical study and experimental proposal

Abstract

This study examines the disposition effect in individual investors and identifies specific attributes that may impact the effect. A survey was conducted regarding investor behavior with 30 respondents from a university located in Finland. It was found that the disposition effect is present in the Finnish market based on findings derived from the empirical portion of the study. The factor analysis was unreliable, but ‘holding unprofitable stock with expectations of improvement,’ ‘avoiding regret,’ and ‘seeking compensation or avoiding net losses’ may be contributing factors to investor behavior in the Finnish market. In addition to the primary empirical analysis, an experimental proposal is also detailed for future research. Group investing is prevalent in Europe and should be investigated to capture a better understanding of market behavior as a whole. The experiment can be used to understand the difference in susceptibility to the disposition effect between individuals vs groups of investors.