How Does Learning and Education Help to Overcome the Disposition Effect?

44 Pages Posted: 25 Jan 2016

See all articles by Tarvo Vaarmets

Tarvo Vaarmets

Tallinn University of Technology (TUT) - Department of Finance and Economics

Kristjan Liivamägi

Tallinn University of Technology (TUT) - Department of Finance and Economics

Tõnn Talpsepp

Tallinn University of Technology

Date Written: December 13, 2015

Abstract

The paper assesses how different types of learning affect the disposition effect. We distinguish between “baseline learning abilities”, “learning by doing” and “learning about one’s abilities”, differences in which emerge clearly from our exhaustive NASDAQ OMX Tallinn dataset. We employ survival analysis to show that stronger learning abilities as measured by education level and the type of education lessen the disposition effect. Stronger overall learners also learn faster by trading. We find that mathematical abilities are beneficial and learning abilities are more important than general mental abilities (measured by standardised academic exams) for overcoming the disposition effect.

Keywords: disposition effect, learning by doing, learning abilities, mental abilities, education

JEL Classification: G02, G11

Suggested Citation

Vaarmets, Tarvo and Liivamägi, Kristjan and Talpsepp, Tõnn, How Does Learning and Education Help to Overcome the Disposition Effect? (December 13, 2015). Available at SSRN: https://ssrn.com/abstract=2721460 or http://dx.doi.org/10.2139/ssrn.2721460

Tarvo Vaarmets

Tallinn University of Technology (TUT) - Department of Finance and Economics ( email )

Akadeemia tee 3
Tallinn, 12618
Estonia

Kristjan Liivamägi

Tallinn University of Technology (TUT) - Department of Finance and Economics ( email )

Akadeemia tee 3
Tallinn, 12618
Estonia

Tõnn Talpsepp (Contact Author)

Tallinn University of Technology ( email )

Akadeemia tee 3
Tallinn, Harju 12618
Estonia

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