Hedging against embarrassment

Marco Goulart; Newton C.A. da Costa; Eduardo B. Andrade; André A.P. Santos

doi:10.1016/j.jebo.2015.04.014

Hedging against embarrassment

Marco Goulart, Newton C.A. da Costa^*, Eduardo B. Andrade, André A.P. Santos

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

This paper assesses the extent to which the expected disclosure to peers of an individual investor's financial performance influences his/her stock-trading decisions. In a lab experiment, participants trade in incentivized stock market simulations, knowing that their financial performance will be either made public or kept private. The results show a significant increase in the disposition effect when financial performance is to be made public, resulting from a spike in the realization of gains. We conclude by suggesting that this phenomenon may be due to individuals' strategic attempt to hedge against the embarrassment of ending the trading session at the bottom of the performance ranking.

Original language	English
Pages (from-to)	310-318
Number of pages	9
Journal	Journal of Economic Behavior and Organization
Volume	116
DOIs	https://doi.org/10.1016/j.jebo.2015.04.014
Publication status	Published - 1 Aug 2015

Keywords / Materials (for Non-textual outputs)

behavioral finance
disposition effect
lab experiments
self-conscious emotions

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10.1016/j.jebo.2015.04.014

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@article{a0a61503e6c242868b138e05c356c6ea,

title = "Hedging against embarrassment",

abstract = "This paper assesses the extent to which the expected disclosure to peers of an individual investor's financial performance influences his/her stock-trading decisions. In a lab experiment, participants trade in incentivized stock market simulations, knowing that their financial performance will be either made public or kept private. The results show a significant increase in the disposition effect when financial performance is to be made public, resulting from a spike in the realization of gains. We conclude by suggesting that this phenomenon may be due to individuals' strategic attempt to hedge against the embarrassment of ending the trading session at the bottom of the performance ranking.",

keywords = "behavioral finance, disposition effect, lab experiments, self-conscious emotions",

author = "Marco Goulart and {da Costa}, {Newton C.A.} and Andrade, {Eduardo B.} and Santos, {Andr{\'e} A.P.}",

year = "2015",

month = aug,

day = "1",

doi = "10.1016/j.jebo.2015.04.014",

language = "English",

volume = "116",

pages = "310--318",

journal = "Journal of Economic Behavior and Organization",

issn = "0167-2681",

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TY - JOUR

T1 - Hedging against embarrassment

AU - Goulart, Marco

AU - da Costa, Newton C.A.

AU - Andrade, Eduardo B.

AU - Santos, André A.P.

PY - 2015/8/1

Y1 - 2015/8/1

N2 - This paper assesses the extent to which the expected disclosure to peers of an individual investor's financial performance influences his/her stock-trading decisions. In a lab experiment, participants trade in incentivized stock market simulations, knowing that their financial performance will be either made public or kept private. The results show a significant increase in the disposition effect when financial performance is to be made public, resulting from a spike in the realization of gains. We conclude by suggesting that this phenomenon may be due to individuals' strategic attempt to hedge against the embarrassment of ending the trading session at the bottom of the performance ranking.

AB - This paper assesses the extent to which the expected disclosure to peers of an individual investor's financial performance influences his/her stock-trading decisions. In a lab experiment, participants trade in incentivized stock market simulations, knowing that their financial performance will be either made public or kept private. The results show a significant increase in the disposition effect when financial performance is to be made public, resulting from a spike in the realization of gains. We conclude by suggesting that this phenomenon may be due to individuals' strategic attempt to hedge against the embarrassment of ending the trading session at the bottom of the performance ranking.

KW - behavioral finance

KW - disposition effect

KW - lab experiments

KW - self-conscious emotions

UR - http://www.scopus.com/inward/record.url?scp=84929624928&partnerID=8YFLogxK

U2 - 10.1016/j.jebo.2015.04.014

DO - 10.1016/j.jebo.2015.04.014

M3 - Article

AN - SCOPUS:84929624928

SN - 0167-2681

VL - 116

SP - 310

EP - 318

JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

ER -

Hedging against embarrassment

Abstract

Keywords / Materials (for Non-textual outputs)

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