What is Disposition Effect?
The disposition effect is the tendency to sell investments that have risen too soon and to hold investments that have fallen too long. The name comes from Shefrin and Statman (1985), and brokerage studies have found it in thousands of real accounts.
Why Disposition Effect matters
Selling winners and keeping losers can leave a portfolio holding its weakest ideas, and in a taxable account it often brings the tax bill forward.