The paper examines investors’ behavior when realizing losses and gains. The analysis shows the existence of the disposition effect in the investments in initial public offering in the years 2006 - 2007. The difference between the proportion of realized losses and the proportion of realized gains was also statistically significant for small-cap stocks and was strong in the period immediately following stock exchange debut (19 days). A strong disposition effect was observed in the group of investors who placed low value orders, whereas in the group of investors who placed high value orders of PLN 25,000 - PLN 100,000 a reverse disposition effect was noted. The findings of this paper prove that the disposition effect is responsible for lower investment returns.

Keywords: disposition effect, proportion of realized gains, proportion of realized losses, prospect theory, initial public offering
JEL: G11, G14

  Marcin Staszewski - The Disposition Effect on the IPO Market of the Warsaw Stock Exchange - plik pdf; (181 KB)