Fully Closed: Individual Responses to Paper Versus Realized Capital Gains and Losses

Steffen Meyer, Michaela Pagel

Research output: Contribution to conference without publisher/journalPaperResearchpeer-review

Abstract

We use transaction-level data of retail investor's portfolio trades and holdings linked to their checking, savings, and settlement account transactions and balances. We exploit exogenous sales due to mutual fund liquidations to estimate the marginal propensity to reinvest when the investor either achieved a gain or loss relative to his or her initial investment. Individuals reinvest 82% on average if the forced sale resulted in a gain, but only 41% in the event of a loss. We thus provide evidence for realization utility and effects and that individuals do not
appear to learn rationally from experiences in the stock market.
Original languageEnglish
Publication date2018
Publication statusPublished - 2018
EventSFS Cavalcade North America 2018 - Yale School of Management, New Haven, United States
Duration: 21. May 201824. May 2018
http://sfs.org/financecavalcades/2018-sfs-finance-cavalcade/

Conference

ConferenceSFS Cavalcade North America 2018
LocationYale School of Management
CountryUnited States
CityNew Haven
Period21/05/201824/05/2018
Internet address

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Keywords

  • Asset allocation

Cite this

Meyer, S., & Pagel, M. (2018). Fully Closed: Individual Responses to Paper Versus Realized Capital Gains and Losses. Paper presented at SFS Cavalcade North America 2018, New Haven, United States.