92 records from EconBiz based on author Name

1. Cautious stochastic choice, optimal stopping and deliberate randomization

Henderson, Vicky; Hobson, David G.; Zeng, Matthew;
2023
Type: Aufsatz in Zeitschrift; Article in journal;
Availability: Link
Citations: 1 (based on OpenCitations) Cited By

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2. Make Hay While the Sun Shines : An Empirical Study of Maximum Price, Regret and Trading Decisions

abstract

Using a dynamic extension of Regret Theory, we test how the regret induced by not selling a stock when the maximum price in an investment episode is attained shapes the propensity to sell a stock. We use a large discount brokerage dataset containing US households’ trading records between 1991 and 1996. Expected utility predicts that investors should stop at a threshold, whilst a Regret agent does not necessarily stop there. We observe that investors do not follow a threshold strategy in our data. Only 31.6% of the gains are sold on the day when the maximum is attained and 25.8% of the losses are sold on the day when the minimum is attained. We find that more sophisticated and younger investors are more likely to follow a threshold strategy. Second, we find that investors are more likely to sell a stock for a gain in a moment closer in time to the maximum occurrence and at a price further from the running maximum price of the stock in the investment episode. Anticipated regret and belief updating might explain this pattern. The propensity to sell a gain steadily declines a short time after the maximum was attained. We suggest that traders might regret not selling at a time close to the maximum day and hold onto the stock if a long time has passed

Brettschneider, Julia; Burro, Giovanni; Henderson, Vicky;
2023
Availability: Link Link
Citations: 1 (based on OpenCitations) Cited By

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3. Not in my mind : The disposition effect is in the eyes of the beholder

abstract

We propose an extension to the concept of the disposition effect by allowing the use of alternative reference points. While the traditional definition is based on classifying stocks as winners and losers solely based on the purchase price, we incorporate stock prices closer to sell date into the construction of the reference point. We study these concepts in a large individual trader dataset. Using the average of the last five trading day prices as reference point, we find a reduction of the disposition effect by 71%. It decreases further for investors who trade more and whose trading episodes are shorter. This opens up the possibility that the disposition effect, viewed from a psychological perspective, might be a weaker phenomenon than the traditional calculations suggest

Brettschneider, Julia; Burro, Giovanni; Henderson, Vicky;
2021
Availability: Link Link
Citations: 1 (based on OpenCitations) Cited By

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4. Wide Framing Disposition Effect : An Empirical Study

abstract

We estimate the disposition effect for active traders in a large discount brokerage dataset containing US households’ trading records between 1991 and 1996. We apply a wide framing perspective, focusing on portfolios rather than individual stocks. We find that the disposition effect varies inversely with the proportion of stocks trading at a gain in the portfolio, nearly vanishing when this proportion reaches 50%. This is driven by how the realisation of gains and losses depends on the percentage of gains in the account. The probability to realise a loss increases with the percentage of gains in the account. The relation between the probability of realising a gain and the percentage of gains in the bank account follows a U-shape. We also estimate the change in the disposition effect when an investor realises more than one stock on a trading day. We find when investors sell a stock, they are much more likely to also realise another stock on the same day. In particular, selling a loss increases an investor’s propensity to sell a gain and vice versa. This key finding provides an explanation for the observed dependency of the disposition effect on the portfolio composition. We also propose several psychological explanations for our findings

Brettschneider, Julia; Burro, Giovanni; Henderson, Vicky;
2021
Availability: Link Link

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5. Wide framing disposition effect : an empirical study

Brettschneider, Julia; Burro, Giovanni; Henderson, Vicky;
2021
Type: Aufsatz in Zeitschrift; Article in journal;
Availability: Link
Citations: 3 (based on OpenCitations) Cited By

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6. The value of being lucky : option backdating and nondiversifiable risk

Henderson, Vicky; Sun, Jia; Whalley, A. Elizabeth;
2021
Type: Aufsatz in Zeitschrift; Article in journal;
Availability: Link

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7. Cautious Stochastic Choice, Optimal Stopping and Deliberate Randomization

abstract

We study Cautious Stochastic Choice (CSC) agents facing optimal timing decisions in a dynamic setting. In an expected utility setting, the optimal strategy is always a threshold strategy - to stop/sell the first time the price process exits an interval. In contrast, we show that in the CSC setting, where the agent has a family of utility functions and is concerned with the worst case certainty equivalent, the optimal strategy may be of non-threshold form and may involve randomization. We provide some carefully constructed examples, including one where we can solve explicitly for the optimal stopping rule and show it is a non-trivial mixture of threshold strategies. Our model is consistent with recent experimental evidence in dynamic setups whereby individuals do not play cut-off or threshold strategies

Henderson, Vicky; Hobson, David G.; Zeng, Matthew;
2020
Availability: Link Link
Citations: 2 (based on OpenCitations) Cited By

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8. Partial liquidation under reference-dependent preferences

Henderson, Vicky; Muscat, Jonathan;
2020
Type: Aufsatz in Zeitschrift; Article in journal;
Availability: Link
Citations: 2 (based on OpenCitations) Cited By

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9. Executive Stock Options : Portfolio Effects

abstract

More than half of S&P 500 CEOs receive options annually, however extant valuation models have not accounted for portfolio considerations. We show the inability of executives to diversify means portfolio effects matter: exercise thresholds and shareholder costs are lower than for stand-alone options and vary with portfolio size and composition. The model explains which options to exercise first and how exercise can be induced by new grants, matching empirical findings. Ignoring portfolio composition may invalidate estimates of exercise thresholds, bias inferences about executive characteristics (e.g. optimism) drawn from them and overstate costs, particularly for executives with larger portfolios

Henderson, Vicky; Whalley, A. Elizabeth; Sun, Jia;
2019
Availability: Link Link
Citations: 2 (based on OpenCitations) Cited By

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10. Portfolios of American Options Under General Preferences : Results and Counterexamples

abstract

We consider the optimal exercise of a portfolio of American call options in an incomplete market. Options are written on a single underlying asset but may have different characteristics of strikes, maturities and vesting dates.Our motivation is to model the decision faced by an employee who is granted options periodically on the stock of her company, and who is not permitted to trade this stock. The first part of our study considers the optimal exercise of single options. We prove results under minimal assumptions and give several counterexamples where these assumptions fail - describing the shape and nesting properties of the exercise regions.The second part of the study considers portfolios of options with differing characteristics. The main result is that options with co-monotonic strike, maturity and vesting date should be exercised in order of increasing strike. It is true under weak assumptions on preferences and requires no assumptions on prices. Potentially the exercise ordering result can significantly reduce the complexity of computations in a particular example. This is illustrated by solving the resulting dynamic programming problem in a CARA utility indifference model

Henderson, Vicky; Whalley, A. Elizabeth; Sun, Jia;
2019
Availability: Link Link

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