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Buy, sell, or hold? A sense-making account of factors influencing trading decisions

Sobolev, D; Chan, B; Harvey, N; McMillan, D; (2017) Buy, sell, or hold? A sense-making account of factors influencing trading decisions. Cogent Economics & Finance , 5 (1) , Article 1295618. 10.1080/23322039.2017.1295618. Green open access

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Abstract

We investigated the effects of news valence, the direction of trends in graphically presented price series, and the culture and personality of traders in a financial trading task. Participants were given 12 virtual shares of financial assets and asked to use price graphs and news items to maximize their returns by buying, selling, or holding each one. In making their decisions, they were influenced by properties of both news items and price series but they relied more on the former. Western participants had lower trading latencies and lower return dispersions than Eastern participants. Those with greater openness to experience had lower trading latencies. Participants bought more shares when they forecast that prices would rise but failed to sell more when they forecast that they would fall. These findings are all consistent with the view that people trading assets try to make sense of information by incorporating it within a coherent narrative.

Type: Article
Title: Buy, sell, or hold? A sense-making account of factors influencing trading decisions
Open access status: An open access version is available from UCL Discovery
DOI: 10.1080/23322039.2017.1295618
Publisher version: http://doi.org/10.1080/23322039.2017.1295618
Language: English
Additional information: This work is licensed under a Creative Commons Attribution 4.0 International License. The images or other third party material in this article are included in the article’s Creative Commons license, unless indicated otherwise in the credit line; if the material is not included under the Creative Commons license, users will need to obtain permission from the license holder to reproduce the material. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/
Keywords: Trading, forecasts, price trends, personality, culture JEL classification: 2340 Cognitive Processes, G10 Behavioral Finance: Underlying Processes
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management
URI: https://discovery.ucl.ac.uk/id/eprint/1575568
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