Letting Go of Your Losses: Experimental Evidence for Debiasing the Disposition Effect in Private Investment Decisions

Abstract

This study examines the impact of two different debiasing interventions on the emergence of the disposition effect in the investment decisions of private investors. By means of a fully crossed 2 x 2 between-participants online experiment (N = 223) and an established stock market simulation task, we examine the potential debiasing effects of rational warnings and emotional warnings on the emergence of the disposition effect. The disposition effect was successfully eliminated by both debiasing strategies. The simultaneous presence of both interventions did not increase the solitary effect of each of the two interventions.