Why do investors sell losers? How adaptation to losses affects future capitulation decisions

According to disposition effect theory, people hold losing investments too long. However, many investors eventually sell at a loss, and little is known about which psychological factors contribute to these capitulation decisions. This study integrates prospect theory, utility maximization theory, and theory on reference point adaptation to argue that the combination of a negative expectation about an investment’s future performance and a low level of adaptation to previous losses leads to a greater capitulation probability. The test of this hypothesis in a dynamic experimental setting reveals that a larger total loss and longer time spent in a losing position lead to downward adaptations of the reference point. Negative expectations about future investment performance lead to a greater capitulation probability. Consistent with the theoretical framework, empirical evidence supports the relevance of the interaction between adaptation and expectation as a determinant of capitulation decisions. Keywords: Investments , Adaptation , Reference Point , Capitulation , Selling Decisions , Disposition Effect , Financial Markets JEL Classification: D91, D03, D8

Global supply chains of high value low volume products

Imperial Users onl

Information Switching Processor (ISP) contention analysis and control

Future satellite communications, as a viable means of communications and an alternative to terrestrial networks, demand flexibility and low end-user cost. On-board switching/processing satellites potentially provide these features, allowing flexible interconnection among multiple spot beams, direct to the user communications services using very small aperture terminals (VSAT's), independent uplink and downlink access/transmission system designs optimized to user's traffic requirements, efficient TDM downlink transmission, and better link performance. A flexible switching system on the satellite in conjunction with low-cost user terminals will likely benefit future satellite network users