Disposition Effect across Distinct Investor Categories in a Tax-Free Context: Are Team Dynamics and Cognitive Dissonance behind It?

Building on recent literature and employing survival analysis on trading data, we document differences in the strength and direction of the disposition effect on distinct categories of investors: (i) individuals not receiving professional advice; (ii) individuals receiving it; (iii) professional managers of delegated retail portfolios; (iv) professional managers of funds/institutional portfolios. We also find that the disposition effect is contingent upon paper gain-loss magnitudes in a more complex way than the V-shape proposed by the literature, and that market ups-downs do not exert influence on the propensity to this bias. We interpret our results using alternative explanations of investor behavior.