Daily income target effects: Evidence from a large sample of professional commodities traders
We provide evidence of rational reference-dependent preferences in the proprietary trading of professional traders. We find increased trading effort and risk taking by traders following morning losses. Further analysis provides no evidence of a deterioration in trading performance subsequent to losses, as neither risk-adjusted performance nor trade execution appear to be negatively affected by prior losses. The evidence supports the existence of rational reference-dependent preferences in the form of trader daily income targets: these professional traders exhibit increased work effort subsequent to abnormal morning losses. The evidence is inconsistent with the alternative explanation of costly loss aversion.
Year of publication: |
2009
|
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Authors: | Locke, Peter R. ; Mann, Steven C. |
Published in: |
Journal of Financial Markets. - Elsevier, ISSN 1386-4181. - Vol. 12.2009, 4, p. 814-831
|
Publisher: |
Elsevier |
Keywords: | Daily income targets Reference dependence Loss aversion |
Saved in:
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