TY  - JOUR
AU  - Goetzmann,William N.
AU  - Massa,Massimo
TI  - Disposition Matters: Volume, Volatility and Price Impact of a Behavioral Bias
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9499
PY  - 2003
Y2  - February 2003
UR  - http://www.nber.org/papers/w9499
L1  - http://www.nber.org/papers/w9499.pdf
N1  - Author contact info:
William N. Goetzmann
School of Management
Yale University
Box 208200
New Haven, CT 06520-8200
Tel: 203/432-5950
Fax: 203/432-3003
E-Mail: william.goetzmann@yale.edu

Massimo Massa
INSEAD
Department of Finance
Blve de Constance
77305 Fontainebleau  FRANCE
E-Mail: massimo.massa@insead.edu
AB  - In this paper, we estimate the behavioral component of the Grinblatt and Han (2002) model and derive several testable implications about the expected relationship between the preponderance of disposition-prone investors in a market and volume, volatility and stock returns. To do this, we use a large sample of individual accounts over a six-year period in the 1990's in order to identify investors who are subject to the disposition effect. We then use their trading behavior to construct behavioral factors. We show that when the fraction of irrational' investor purchases in a stock increases, the unexplained portion of the market price of the stock decreases. We further show that statistical exposure to a disposition factor explains cross-sectional differences in daily returns, controlling for a host of other factors and characteristics. The evidence is consistent with the hypothesis that trade between disposition-prone investors and their counter-parties impacts relative prices.
ER  -