The role of investor sentiment and market belief in forecasting V-shaped disposition effect: Evidence from a Bayesian learning process with DSSW model

By using the trading data and corporate financial data from 2010 to 2022 in Korean stock market, we combine the Bayesian learning process with the DSSW model to investigate the size and specific manifestations of the disposition effect when market belief is different from investors' irrational...

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Bibliographic Details
Published in:The North American journal of economics and finance 2024-03, Vol.71, p.102084, Article 102084
Main Authors: Bouteska, Ahmed, Kabir Hassan, M., Gider, Zeynullah, Bataineh, Hassan
Format: Article
Language:English
Subjects:
Asset pricing
Irrational expectation
Speculative trading
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Summary:By using the trading data and corporate financial data from 2010 to 2022 in Korean stock market, we combine the Bayesian learning process with the DSSW model to investigate the size and specific manifestations of the disposition effect when market belief is different from investors' irrational beliefs. We find that there is a significant negative correlation between investor sentiment and the investor disposition effect. Moreover, affected by sentiment, the performance of investor disposition effect in the bull market and the bear market is quite opposite. The conclusion of this paper has certain theoretical and practical significance for understanding the disposition effect of investors, optimizing investors' selling decisions, and strengthening the construction of a basic system of the capital market.
ISSN:1062-9408
1879-0860
DOI:10.1016/j.najef.2024.102084