Associate Professor An Li from Tsinghua University PBC School of Finance, along with her collaborators, discovered in their paper titled "The Portfolio Driven Disposition Effect" that the disposition effect for a stock significantly weakens if the portfolio is at a gain, but is large when it is at a loss. They find this portfolio-driven disposition effect (PDDE) in four independent settings: US and Chinese archival data, as well as US and Chinese experiments. The PDDE is robust to a variety of controls in regression specifications and is not explained by extreme returns, portfolio rebalancing, tax considerations, or investor heterogeneity. And evidence suggests investors form mental frames at the stock and portfolio level and these frames combine to generate the PDDE. The paper has been accepted by Journal of Finance.

The co-authors of the paper include Joseph Engelberg from the University of California, San Diego, Matthew Henriksson from the University of Tennessee, Wang Baolian from the University of Florida, and Jared Williams from the University of South Florida.

Please refer to the link below for the paper.

https://www.pbcsf.tsinghua.edu.cn/dfiles/AEHWW.pdf