In the context of behavioural finance, the 'Disposition Effect' refers to:
A. The tendency to sell losers and hold winners
B. Perfectly rational realisation of gains and losses
C. Only the effect of taxes on trading
D. The tendency of investors to sell winning investments too early and hold losing investments too long
Answer: Option D
Solution (By JKSSB Mock Tests)
The disposition effect is the empirical regularity that investors are more likely to realise gains than losses, consistent with prospect-theory value functions and the reluctance to admit mistakes.
No comments yet. Be the first to start the discussion!