Volume 5, Number 4, 2004 Abstracts
© Copyright Erlbaum 2005

Editorial Commentary:
Trust, Complexity and the 1990s Market Bubble
Robert Olsen-California State University, Chico, and Decision Research

Day Traders and the Disposition Effect
Douglas Jordan-Sonoma State University
J. David Diltz-University of Texas at Arlington

The disposition effect refers to the tendency to hold losing investments and sell profitable ones. We examine day trader transactions for evidence of a disposition effect. We find that approximately 65% of sample traders hold losing trades longer than profitable ones, providing evidence that sample day traders display the disposition effect.

Measuring the Impact of Behavioral Traders on the Market for Closed-End Country Funds
Hugh Kelley-Department of Economics at Indiana University

This work investigates whether traders' state-dependent expectations biases can account for anomalous country fund discount movements. I provide a multiple-agent asset pricing model that includes both rational traders and traders who display biases in expectations formation following market states with large amounts of price variance or CNN financial news. Importantly, traders' biased behavior is based on evidence of state-dependent over- or underreaction biases observed in asset price forecasting experiments. Closed-form solutions from a multi-agent pricing model predict a multiple driver property of fund prices. Empirical tests for these drivers' influence in field data finds that up to 21% of the out-of-sample country fund discount variance can be explained by dummies representing the occurrence of behavioral bias trigger states.

Commissions Matter: The Trading Behavior of Institutional and Individual Active Traders
Ryan Garvey-A.J. Palumbo School of Business Administration and the John F. Donahue Graduate School of Business, Duquesne University
Anthony Murphy-University College Dublin, Dublin, Ireland

We examine how commissions influence trading behavior by analyzing a unique data set of the equity trades of both individual and institutional active traders. Individual traders pay higher trading costs than institutional traders. As a result, they engage in more risky trading behaviors in order to cover these costs. Individual traders also trade significantly less because of their higher cost of trading. Individual traders tend to trade higher-priced stocks, hold their trades longer, and they experience much larger price swings than institutional traders. This leads individual traders to realize more dramatic gains and losses on their round-trips.

Herding in the Italian Stock Market: A Case of Behavioral Finance
Franco Caparrelli-University of Siena in Italy
Anna Maria D'Arcangelis-University of Tuscia in Italy
Alexander Cassuto-California State University, Hayward

This article studies the herding effect in the capital markets. Using data from the Italian Stock Exchange, the authors test for the presence of herding as described in Christie and Huang [1995], Chang, Cheng, and Khorana [2000], and Hwang and Salmon [2001]. The tests support Christie and Huang's conclusions that herding is present in extreme market conditions.

Research Elsewhere
Robert A. Olsen-California State University, Chico, and Decision Research