Are Investors Reluctant to Realize Their Losses during Financial Crises? Evidence form Taiwanese and Chinese Stock Markets

This paper utilizes the disposition coefficient to verify whether disposition effect exhibits in Taiwan and Chinese stock markets during the periods of financial crises, and to discuss the differences of the disposition effect between appreciation and depreciation periods. The empirical results show that during the 1997 Asian financial crisis, disposition effect significantly exhibits in the both markets, but during the 2008 global financial crisis, disposition effect only exhibits in Chinese stock market. Nevertheless, there are no significant differences of disposition effect between A-shares and B-shares in Chinese stock market. This paper further concludes that disposition effect would significantly exist in appreciation period, but not in depreciation period no matter when the financial crisis comes into being. 1 Department of Finance and Banking, Aletheia University, No. 32, Chen-Li Street, Tamsui, New Taipei City 25103, Taiwan (R.O.C.), e-mail: [email protected] Article Info: Received : March 5, 2012. Revised : April 24, 2012 Published online : May 31, 2012 92 Are Investors Reluctant to Realize Losse JEL classification numbers: G02