Disposition Effect: Brazilian Investors' Behavior during the Covid-19 Pandemic

• Autor(a) principal: Barreto, Pedro
• Data de Publicação: 2022
• Outros Autores: Barbedo, Claudio, Camilo-da-Silva, Eduardo
• Tipo de documento: Artigo
• Idioma: eng; por
• Título da fonte: BBR. Brazilian Business Review (English edition. Online)
• DOI: 10.15728/bbr.2023.20.1.1.en
• Texto Completo: http://www.bbronline.com.br/index.php/bbr/article/view/734
• topic: Prospect Theory; Disposition Effect; Behavioral Finance; Loss Aversion; Finanças comportamentais; efeito disposição; teoria das perspectivas; aversão à perda

This study investigates the disposition effect with regard to Brazilian investors, with focus on the year 2020. The database is composed by more than 12,000 trades by 274 investors. We follow the method of Odean (1998) to estimate the proportions of gains and losses realized and test the null hypothesis of equality of these proportions in each portfolio. The results suggest that Brazilian investors behave in line with the disposition effect. They sell winning stocks too early and hold losing stocks too long. A stock that is gaining value is more likely to be sold from day to day compared to a stock that is losing value. The disposition effect was not found in March, which suggests that investors employed a loss-limit during periods of market stress, no matter if the stock went up or down.