Incidental Negative Life Events and the Disposition Effect at the Individual Level

Abstract In this study, we explore the role of individual exposure to negative life events on disposition effect (DE) – i.e., tendency traders in financial markets sell assets at gain faster than those a loss. We hypothesize that may influence through different behavioral mechanisms, namely trading volume reduction, better information processing, and emotions. three studies, combine quasi-natural experiment by considering effect, as measured with data from exercise, both before during COVID-19 pandemic across individuals exposed extent COVID-19. also manipulated elicited emergence specific emotions tested whether such DE. Our results show will reduce mainly via processing emotion. Negative further DE when anger is decision-maker. JEL classification numbers: G11, G41. Keywords: Disposition events, Experiment.