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<p>We identify a novel anomaly in the Chinese stock market: stocks exhibit higher expected returns when the disposition effect becomes more asymmetric. This phenomenon cannot be explained by commonly used asset pricing factors. To investigate this, we construct a new factor, denoted as <InlineEquation ID="IEq1"> <InlineMediaObject> <ImageObject Color="BlackWhite" FileRef="41260_2025_412_Article_IEq1.gif" Format="GIF" Height="17" Rendition="HTML" Resolution="72" Type="Linedraw" Width="141" /> </InlineMediaObject> <EquationSource Format="TEX">\(\Delta \text{Disposition Effect}\)</EquationSource> <EquationSource Format="MATHML"><math> <mrow> <mi mathvariant="normal">Δ</mi> <mtext>Disposition Effect</mtext> </mrow> </math></EquationSource> </InlineEquation>, to quantify the change in the disposition effect. Using transaction and financial data from Chinese listed companies between 2003 and 2021, we examine the informational content of the <InlineEquation ID="IEq2"> <InlineMediaObject> <ImageObject Color="BlackWhite" FileRef="41260_2025_412_Article_IEq1.gif" Format="GIF" Height="17" Rendition="HTML" Resolution="72" Type="Linedraw" Width="141" /> </InlineMediaObject> <EquationSource Format="TEX">\(\Delta \text{Disposition Effect}\)</EquationSource> <EquationSource Format="MATHML"><math> <mrow> <mi mathvariant="normal">Δ</mi> <mtext>Disposition Effect</mtext> </mrow> </math></EquationSource> </InlineEquation> and its ability to explain expected excess returns on stocks. Our findings reveal that the new factor captures investor sentiment and demonstrates significant explanatory power for cross-sectional stock returns.</p>

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Change of the disposition effect and investor sentiment

  • 期刊论文

  • 发表日期：

    2025年7月7日

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  • Pujian Yang,
  • Liu Yang

摘要

We identify a novel anomaly in the Chinese stock market: stocks exhibit higher expected returns when the disposition effect becomes more asymmetric. This phenomenon cannot be explained by commonly used asset pricing factors. To investigate this, we construct a new factor, denoted as \(\Delta \text{Disposition Effect}\) Δ Disposition Effect , to quantify the change in the disposition effect. Using transaction and financial data from Chinese listed companies between 2003 and 2021, we examine the informational content of the \(\Delta \text{Disposition Effect}\) Δ Disposition Effect and its ability to explain expected excess returns on stocks. Our findings reveal that the new factor captures investor sentiment and demonstrates significant explanatory power for cross-sectional stock returns.