The Ex-dividend And Disposition Effect-An Empirical Study in Taiwan

[[abstract]]Shefrin and Starman (1985) defines the tendency of stock investors’ selling winners too early and keeping losers too long as Disposition Effect, which can be partially explained by Prospect Theory (Kahneman & Tversky, 1979). This study closely examines the difference between the fluctuation of the disposition effect and the ex-dividend date. The analysis data are the trading behavior of listed shares holders between 2001 and 2010 in Taiwan. Shareholders’ behavior is measured with disposition coefficient, suggested by Weber and Camerer (1998). The results show that, after the ex-dividend date, the disposition effect on stocks with higher market value is statistically significant with an increased disposition coefficient. After the ex-dividend date, shareholders exhibit a greater disposition effect on stocks with potential price increase than stocks without and the same behavioral pattern which goes to stocks with price increase versus those with price decrease. Also, the amount of dividend is insignificantly correlated with the disposition effect