The disposition effect in South African Equity markets

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dc.contributor.advisorWest, Darronen_ZA
dc.contributor.advisorWillows, Gizelleen_ZA
dc.contributor.authorBashall, Jamesen_ZA
dc.date.accessioned2015-06-15T07:01:39Z
dc.date.available2015-06-15T07:01:39Z
dc.date.issued2014en_ZA
dc.descriptionIncludes bibliographical references.en_ZA
dc.description.abstractThe “disposition effect” describes the propensity for investors to realise gains sooner than losses through selling profit making investments more readily than loss making investments. This behaviour has been observed in financial markets across the world and across all investor classes, albeit to varying degrees. Such trading behaviour has been found not to be profit or utility maximising. I n the absence of rational motives for the disposition effect, it is concluded as being an irrational feature of investor trading behaviour. In search of the reason behind this behaviour, behavioural finance is turned to. No concrete justification for the disposition effect has been isolated as being the sole cause for this apparently irrational trading behaviour. This study tests for the disposition effect in a South African context across two classes of non-professional investors: those acting in their own capacity, and those acting with the assistance of professional investment advisors. The trade history of a sample of 4 840 investor accounts from a South African stockbroker was analysed over the five year period from October 2008 to October 2013. Three primary issues were addressed: (i) whether South African investors exhibit the disposition effect, (ii) if this behaviour is reduced by non-professional investors through the employment of professional advice, and (iii) if this trading behaviour can be justified based on rational g rounds in a South African context. The results showed, consistent with studies elsewhere in the world, that individual investors in South Africa do exhibit the disposition effect both when acting in their own capacity and when acting with the assistance of professionals . Investors acting with the assistance of professional advisors are found, however, to show the effect to a lesser extent. Further, trading consistent with the disposition effect by investors acting with the assistance of professional advisors is found to be rationally justifiable on the grounds of portfolio rebalancing. It is therefore concluded that professional advice reduces the extent to which this irrational trading behaviour is exhibited, thereby increasing investor profits and utility.en_ZA
dc.identifier.apacitationBashall, J. (2014). <i>The disposition effect in South African Equity markets</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax. Retrieved from http://hdl.handle.net/11427/13080en_ZA
dc.identifier.chicagocitationBashall, James. <i>"The disposition effect in South African Equity markets."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2014. http://hdl.handle.net/11427/13080en_ZA
dc.identifier.citationBashall, J. 2014. The disposition effect in South African Equity markets. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Bashall, James AB - The “disposition effect” describes the propensity for investors to realise gains sooner than losses through selling profit making investments more readily than loss making investments. This behaviour has been observed in financial markets across the world and across all investor classes, albeit to varying degrees. Such trading behaviour has been found not to be profit or utility maximising. I n the absence of rational motives for the disposition effect, it is concluded as being an irrational feature of investor trading behaviour. In search of the reason behind this behaviour, behavioural finance is turned to. No concrete justification for the disposition effect has been isolated as being the sole cause for this apparently irrational trading behaviour. This study tests for the disposition effect in a South African context across two classes of non-professional investors: those acting in their own capacity, and those acting with the assistance of professional investment advisors. The trade history of a sample of 4 840 investor accounts from a South African stockbroker was analysed over the five year period from October 2008 to October 2013. Three primary issues were addressed: (i) whether South African investors exhibit the disposition effect, (ii) if this behaviour is reduced by non-professional investors through the employment of professional advice, and (iii) if this trading behaviour can be justified based on rational g rounds in a South African context. The results showed, consistent with studies elsewhere in the world, that individual investors in South Africa do exhibit the disposition effect both when acting in their own capacity and when acting with the assistance of professionals . Investors acting with the assistance of professional advisors are found, however, to show the effect to a lesser extent. Further, trading consistent with the disposition effect by investors acting with the assistance of professional advisors is found to be rationally justifiable on the grounds of portfolio rebalancing. It is therefore concluded that professional advice reduces the extent to which this irrational trading behaviour is exhibited, thereby increasing investor profits and utility. DA - 2014 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2014 T1 - The disposition effect in South African Equity markets TI - The disposition effect in South African Equity markets UR - http://hdl.handle.net/11427/13080 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/13080
dc.identifier.vancouvercitationBashall J. The disposition effect in South African Equity markets. [Thesis]. University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2014 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/13080en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentDepartment of Finance and Taxen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherFinancial Managementen_ZA
dc.titleThe disposition effect in South African Equity marketsen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMComen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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