Investor Attention, Reference Points and the Disposition Effect

Studies of reference-dependent behavior typically examine single reference points. Using data from an online brokerage, we examine the role of multiple reference points in trading behavior. We show that, in addition to a traditional disposition effect for returns since purchase, there is also a disposition effect for returns since latest login, and a strong interaction between the two reference points: Even a tiny loss since last login nullifies the positive effect of a gain since purchase. Given that logins are the product of a decision, these results highlight the importance of when people pay attention, with implications beyond investment decisions