Research Excellence

A few decades ago, researchers discovered a puzzling anomaly in investors’ behaviour. Investors tend to be reluctant to sell assets that have lost values, hoping that their investments will eventually turn around and generate profits. Meanwhile, they prematurely sell assets that have made financial gains. This counterproductive habit is known as the “disposition effect.” 

So far, the disposition effect has been discussed mainly in terms of investors’ behavioural biases. However, behavioural finance studies have shed little light on certain related trading patterns, such as the V-shaped probability of selling or buying more shares against unrealized profits/ losses. 

“It is difficult for behavioural theories to explain this V-shaped pattern,” says Prof. Dai Min, Chair Professor in Applied Statistics and Financial Mathematics, the Department of Applied Mathematics. “In addition, as far as we know, no theoretical models have been proposed to explain other well-documented disposition effect related patterns.” 

To fill this research gap, Prof. Dai and his team proposed a rational (as opposed to behavioural) mechanism: portfolio rebalancing. This strategy enables investors to control risk through dynamic asset allocation. The researchers developed a model to examine whether portfolio rebalancing could help explain the disposition effect and related trading patterns among retail investors.

Their results were illuminating. “While we believe that behavioural explanations are essential in understanding the disposition effect and related trading patterns,” says Prof. Dai, “portfolio rebalancing may also constitute a significant driving force.” Complementing behavioural research, the researchers propose the first rational theory of the disposition effect.

For Prof. Dai and his team, the next challenge will be to separate the rational and behavioural components of the disposition effect to shed further light on this puzzling phenomenon.

處置效應的理性理論

幾十年前，研究人員在投資者行為中發現了一種有趣的異象。投資者往往不願出售已虧損的資產，希望最終能逆轉獲利。與此同時，他們都過早出售有盈利的資產。這種事與願違的投資習慣稱為「處置效應」。 

到目前為止，處置效應的討論主要從投資者行為偏差角度出發。然而，行為金融學研究對某些與此相關的交易模式卻未能提供太多線索，其中，V 形概率模式，即當持有的股票遭受損失或有盈利時投資者會傾向於購買更多或出售這些股票，便是一例。

應用數學系的應用統計及金融數學戴民講座教授說：「行為理論很難解釋這種V形模式。此外，據我們所知，現時仍未有理論模型可以解釋這些與處置效應相關的交易模式。 」

為填補此研究缺口，戴教授和他的團隊提出一套理性（而不是行為）解釋機制：投資組合再平衡，即投資者通過動態資產配置來控制風險。 研究人員建立一個模型來探討投資組合再平衡能否有助解釋散戶投資者的處置效應和相關交易模式。

團隊的研究結果很富啟發性。戴教授說：「雖然我們相信行為金融解釋是瞭解處置效應和相關交易模式的基礎，但投資組合再平衡也可以成為重要的驅動因素。」研究團隊提出了首個關於處置效應的理性理論，能與行為研究發揮相輔相成的作用。

戴教授團隊的下一個挑戰，將是區分處置效應的理性和行為成份，以進一步闡明這種令人費解的現象。