Culture and the disposition effect

TL;DR

This study investigates how cultural factors influence the disposition effect among investors worldwide, revealing significant cross-country differences and the roles of cultural dimensions, age, and gender.

Contribution

It provides empirical evidence linking national cultural dimensions to variations in the disposition effect among a large international sample.

Findings

Great variation in disposition effect across countries

Long-term orientation and indulgence influence susceptibility

Age and gender also significantly affect the disposition effect

Abstract

We study the relationship between national culture and the disposition effect by investigating international differences in the degree of investors' disposition effect. We utilize brokerage data of 387,993 traders from 83 countries and find great variation in the degree of the disposition effect across the world. We find that the cultural dimensions of long-term orientation and indulgence help to explain why certain nationalities are more prone to the disposition effect. We also find support on an international level for the role of age and gender in explaining the disposition effect.