Is the Aggregate Investor Reluctant to Realise Losses? Evidence from Taiwan


  • We are grateful to the Taiwan Stock Exchange for providing the data used in this study. Michael Bowers provided phenomenal computing support, which made this project possible. Terrance Odean is grateful for the financial support of the National Science Foundation (Grant 0222107).


We ask whether the typical investor and the aggregate investor exhibit a bias known as the disposition effect, the tendency to sell investments that are held for a profit at a faster rate than investments held for a loss. We analyse all trading activity on the Taiwan Stock Exchange (TSE) for the five years ending in 1999. Using a dataset that contains all trades (over one billion) and the identity of every trader (nearly four million), we find that in aggregate, investors in Taiwan are about twice as likely to sell a stock if they are holding that stock for a gain rather than a loss. Eighty-four percent of all Taiwanese investors sell winners at a faster rate than losers. Individuals, corporations, and dealers are reluctant to realise losses, while mutual funds and foreigners, who together account for less than 5% of all trades (by value), are not.