Proceedings of the 2018 3rd International Conference on Modelling, Simulation and Applied Mathematics (MSAM 2018)

Disposition Effect and Induce Transaction in Future Market Based on Prospect Theory

Authors
Wenhui Li, Xing Yu, Hongguo Sun
Corresponding Author
Wenhui Li
Available Online July 2018.
DOI
https://doi.org/10.2991/msam-18.2018.71How to use a DOI?
Keywords
disposition effect; induce transaction; prospect theory
Abstract
Futures brokers’ income is mainly based on poundage, which easily lead to induce investors do unnecessary transactions. Disposition effect exist in future market commonly. We construct a prospect theory investment decision model with induce transaction, to explore the relationship between induce transactions and disposition effect. The results show that there is disposition effect and induce transaction in China's futures market. The investors are conducted by intermediaries and IB broker, who do more unnecessary transactions than the investors conduct by staff. Induced transaction not only accelerates the investors to realize winners, but also hold the losses longer, but the impact on the two is asymmetrical, which has a more significant impact on the winners. The relationship between the induced transaction and the disposal effect is not linear, appropriate induce transaction reduce disposition effect, but excessive will increase the disposition effect of the futures market.
Open Access
This is an open access article distributed under the CC BY-NC license.

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Cite this article

TY  - CONF
AU  - Wenhui Li
AU  - Xing Yu
AU  - Hongguo Sun
PY  - 2018/07
DA  - 2018/07
TI  - Disposition Effect and Induce Transaction in Future Market Based on Prospect Theory
BT  - Proceedings of the 2018 3rd International Conference on Modelling, Simulation and Applied Mathematics (MSAM 2018)
PB  - Atlantis Press
SP  - 340
EP  - 342
SN  - 1951-6851
UR  - https://doi.org/10.2991/msam-18.2018.71
DO  - https://doi.org/10.2991/msam-18.2018.71
ID  - Li2018/07
ER  -