The disposition effect . Odean tracked 10000 retail accounts and found the same pattern in every one
Investors realise winners at one and a half times the rate they realise losers. The losers stay. The waiting is the bias.
Winners realised
Cut early. Booked.
14.8pct
PGR . proportion of gains realised
Losers realised
Held. Frozen. Waited.
9.8pct
PLR . proportion of losses realised
The disposition ratio . Odean 1998 . Journal of Finance
PGR / PLR = 1.51 . winners cut 51 pct faster than losers
The buy price is a memory. The market never agreed to it. But the brain anchors there anyway, and a dead position trades places with a working one for years.
Disposition effect data . Odean 1998 . "Are Investors Reluctant to Realize Their Losses?" Journal of Finance Vol 53 . 10000 retail brokerage accounts 1987 to 1993 . PGR 0.148 PLR 0.098. Anchoring bias documented Tversky and Kahneman 1974 Science. Cited here for educational reference only . backtest data not a guarantee of future behaviour.