ABSTRACT
Many of the agents trading in stock exchanges are reluctant in realizing losses, and find it easier to make gains, a behavior called “disposition effect”. Those agents can be individual or institutional, the latter being considered more rational in their decision-making. Thus, this paper aimed to analyze whether there are differences regarding the presence of the disposition effect in the financial decision-making between individual and institutional investors. The sample comprised transactions carried out by individual and institutional investors, from January 2012 to October 31, 2014, with real data from three assets obtained in the Brazilian stock exchange, using a specific methodology to detect the disposition effect. Results showed that the disposition effect is present in all analyses for individual investors and in only a few analyses for institutional investors, being stronger for individual investors. This indicates that individual investors are more biased by the disposition effect, while institutional investors are less biased. Furthermore, the average returns on institutional investors' investments were higher than those obtained by individual investors, showing that institutional investors achieve better returns on their investments.
Keywords:
Disposition effect; Stock Exchange; Individual investors; Institutional investors; Decision-making