A heterogeneous model of disposition effect
A portfolio choice model is provided to illustrate the disposition effect under irrational belief in mean reversion assumption. Higher cognitive reference, stronger irrational belief in mean reversion magnitude and less risk aversion all strengthen the disposition effect in the model. The equilibrium market interest rate is priced after the market clearing condition is employed. The grater disposition effect reduces the capital mobility from the stock market to the bond market and thus mitigates the dropping of the market interest rate.
Year of publication: |
2006
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Authors: | Hung, Mao-Wei ; Yu, Hsiao-Yuan |
Published in: |
Applied Economics. - Taylor & Francis Journals, ISSN 0003-6846. - Vol. 38.2006, 18, p. 2147-2157
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Publisher: |
Taylor & Francis Journals |
Saved in:
Online Resource
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