Salience and the disposition effect: Evidence from the introduction of "Cash-Outs" in betting markets

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Abstract

The disposition effect describes the tendency of investors to sell assets that have increased in value since purchase, and hold those that have not. We analyse the introduction of betting market ‘Cash-Outs’, which provide a continual update – and therefore increase the salience – of bettors’ paper profits/losses on each bet. We find that the introduction of Cash-Out increased the disposition effect in this market, as punters sold their profitable bets with greater frequency than before. We do not, however, find that the disposition effect has any impact on asset prices, either before or after this intervention.
Original languageEnglish
Pages (from-to)1052–1073
Number of pages22
JournalSouthern Economic Journal
Volume83
Issue number4
Early online date1 Mar 2017
DOIs
Publication statusPublished - Apr 2017

Keywords

  • disposition effect
  • salience
  • prospect theory
  • betting

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