天氣變化對不同類型投資者處置效果影響：以台灣期貨市場為例 - 政大學術集成

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(1)國立政治大學財務管理學系研究所碩士學位論文. 天氣變化對不同類型投資者處置效果影響：以治. 政. 大. 台灣期貨市場為例立. ‧ 國. 學. The Effect of Weather on Disposition Effect of Different Types. ‧. of Investors: Evidence from the Taiwan Futures Exchange. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v. 指導教授：周冠男博士. 研究生：謝育芬撰. 中華民國一百零五年六月.

(2) 國立政治大學財務管理學系研究所論文口試委員會審定書謝育芬撰之碩士論文天氣變化對不同類型投資者處置效果影響：以台灣期貨市場為例. 治. 政 The Effect of Weather on Disposition Effect 大 of Different Types. 立. of Investors: Evidence from the Taiwan Futures Exchange. ‧. ‧ 國. 學. 業經本委員會審議通過. sit. y. Nat. n. al. er. io. 論文口試委員會委員. Ch. engchi. i Un. v. 指導教授. 系主任(所長) 中華民國 105 年 6 月.

(3) 謝辭記得碩一時選修老師的行為財務課，我很喜歡老師的上課方式，也因此喜歡上這個領域，並希望之後我的論文能研究行為財務學，很幸運地我能成為老師的指導學生。老師對指導學生們都很照顧，我們有任何問題，老師都會不吝嗇地給予協助。我能夠完成這篇論文，首先要感謝得便是我的指導教授。我在寫論文的過程當中遇到一些問題，並於每次 meeting 時提問，老師都能給予我很好的提點，讓我更加清楚自己的研究方向，真的非常感謝老師。我也要謝謝我的同門好友盧建勳，我們一起研究 SAS code，一起討論論文的方向與內容，互相鼓勵。. 政治大我的榜樣，我很感恩能夠在多次的分組報告與她同組，她總是能帶領著團隊順利立. 研究所的這兩年我很感謝我的好朋友李佳盈，她的專業與好學的態度一直是. ‧ 國. 學. 地完成每次的個案討論。我感謝所上的同學們在這兩年期間的陪伴與扶持，也感謝在過去求學當中遇到的好朋友們，有你們的陪伴與幫助讓我感到好溫暖。我感. ‧. 謝在求學中每一階段遇到的老師傳道、授業、解惑也。. sit. y. Nat. 最後我要感謝我的家人這一路來對我的包容與扶持。謝謝哥哥給予我課業上. io. al. er. 的協助，他一直是我的榜樣；謝謝父母給予我溫暖的避風港，及對我的栽培。這. iv n C hengchi U 樹逐漸枯委，是時候換我成為家人的大樹。這是我邁入社會前最後一段求學，我 n. 幾年發現父母的頭髮斑白、時常感到腰痠背痛，才驚覺過去為兒女遮風避雨的大. 感謝在當學生期間，生活中曾經對我伸出援手的所有人，感謝你們的付出，一點一滴都放在我心裡，也祝福你我未來的每一天都能健康開心。最後希望這篇論文能夠幫助學弟妹找到論文的方向。.

(4) 摘要有許多研究指出天氣影響投資者的情緒與風險態度，進而影響其行為與決策。因此，探討天氣變化如何影響風險偏好，進而影響不同類型投資者處置效果是本研究的主軸。在這篇文章中，我們探討兩個假設。首先，我們檢測不同類型投資者是否存在不同程度的處置效果。接著，我們檢測天氣如何影響不同類型投資者的處置效果。我們使用台灣期貨交易所的資料進行分析，並發現國內法人及國內散戶有顯著的處置效果，且相較於國內法人，國內散戶有較強的處置效果。另外，我們發現溫度和國內法人及國內散戶的處置效果有正向關聯；降雨量和國外法人. 政治大顯示天氣影響不同類型投資者的處置效果。立. 的處置效果有正向關聯；日照程度和國內散戶的處置效果有正向關聯。實驗結果. ‧. ‧ 國. 學. n. al. er. io. sit. y. Nat. 關鍵字：展望理論、處置效果、天氣. Ch. engchi. i Un. v.

(5) Abstract There are many studies indicated that weather influences investors’ mood and risk attitude, which then affect investors’ behavior and decision-making. The purpose of this paper is to research how weather influences disposition effect of different types of investors in the futures market through its effect on risk preference. In this paper, we examine two hypotheses. First, we test whether disposition effect may vary across different types of investors. Second, we test how weather influences disposition effect of different types of investors. Using the dataset from TAIFEX, we find both domestic. 政治大 individuals have higher disposition effect than domestic corporations. Moreover, we 立. corporations and domestic individuals have significant disposition effect. Domestic. ‧ 國. 學. find there is positive relationship between temperature and disposition effect of both domestic corporations and domestic individuals. There is positive relationship between. ‧. rain and disposition effect of foreign institutions. There is positive relationship between. sit. y. Nat. sunshine and disposition effect of domestic individuals. The results indicate that. n. al. er. io. weather influences disposition effect of different types of investors.. Ch. engchi. i Un. Keywords: Prospect theory, Disposition effect, Weather. v.

(6) Catalog 1. 1.1. Motivation…………………………………………………………………..1. 1.2. Objective…………………………………………………………………....3. Literature Review…………………………………………………………………4 2.1. Prospect Theory…………………………………………………………….4. 2.2. Disposition Effect…………………………………………………………..6. 2.3. 學. Data and Methodology…………………………………………………………10 Data Description………………………………………………………..…10. 3.2. Research Methodology……………………………………………………12. 3.3. Hypotheses Development…………………………………………………15. 4.1. Disposition Effect of Four Types of Investors…………………………….19. 4.2. The Effect of Weather on Disposition Effect...………………………..21. ‧. 3.1. io. sit. y. Nat. al. iv n C Empirical Results………………………………………………………………..19 hengchi U n. 4. er. 3. 政治大 Weather……………………………………………………………………..9 立. ‧ 國. 2. Introduction…………………………………………………………………….....1. 5. Conclusion……………………………………………………………………….30. 6. References……………………………………………………………………….32.

(7) List of Tables Table 1 Trading frequency and percentage of four types of investors……………….11 Table 2 Summary statistics of weather variables…………………………………….11 Table 3 Summary statistics of disposition effect (PGR-PLR)……………….……….14 Table 4 Disposition effect of four types of investors………………………………...20 Table 5 Correlation coefficients of independent variables………………………...…21 Table 6 Regression analysis of domestic corporations.................................................23. 政治大 Table 7 Regression analysis 立 of domestic individuals………………………………...25. ‧ 國. 學. Table 8 Regression analysis of domestic institutions………….………………….….27. ‧. Table 9 Regression analysis of foreign institutions……………………………..……29. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v.

(8) List of Figures Figure 1 Value Function……………………………………………………………….5 Figure 2 Weighting Function…………………………………………………………..5. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i Un. v.

(9) 1. Introduction 1.1 Motivation The traditional finance theory assumes people are rational, and they maximize expected utility when making decisions under uncertainty. Neumann and Morgenstern (1944) proposed that expected utility maximization procedure is to calculate the probability-weighted expected utility value of different levels of wealth, and then choose the prospect with the highest expected utility. Besides, Fama (1970) advocated the efficient market hypothesis (EMH) based on rational behavior of investors.. 政治大. However, some recent studies find many anomalies, including lagged reactions to. 立. earnings announcements, value versus growth stocks, momentum and reversal effect,. ‧ 國. 學. and small firm size effect. Investors are not always rational, and sometimes trade on noise. These new findings violate traditional finance theory, so behavioral finance. ‧. theory arise in response to those challenges. The behavioral finance theory, combining. y. Nat. n. al. er. io. and market anomalies recognized as modern finance theory.. sit. fields of finance, economics, psychology, and sociology to explain behavioral biases. i Un. v. Kahneman and Tversky (1979) observed that people exhibit risk aversion in gains,. Ch. engchi. while exhibiting risk seeking in losses. People’s behavior is inconsistent with expected utility theory, therefore they developed prospect theory to demonstrate differences from expected utility theory, and to truly describe people’s decision making under risk. Shefrin and Statman (1985) found that investors tend to realize winners too early and hold losers too long, and they defined this phenomenon as the disposition effect. Odean (1998) calculated proportion of gains realized (PGR) and proportion of losses realized (PLR) to test disposition effect of individual investors. If PGR is significantly higher than PLR, which means individual investors have high disposition effect. 1.

(10) Choe and Eom (2009) analyzed the Korean stock index futures trading data from January 2003 to March 2005 and found that the disposition effect of individual investors is stronger than that of the institutional and foreign investors. Li, Lin Cheng, and Lai (2013) examined the disposition effect in the Taiwan futures market. The result indicated that disposition effect of retail investors and foreign institutional investors are obvious, while that of the proprietary investors is not significant. From previous studies, we learn that disposition effect vary across different types of traders in different countries’ futures market. As a result, this paper would like to test whether disposition effect vary across four types of investors (including domestic corporations, domestic. 政治大. individuals, domestic institutions, foreign institutions) in TAIFEX.. 立. Many researches indicate that weather conditions influence people’ mood and risk. ‧ 國. 學. attitudes, which then affect people’ decision-making. Cao and Wei (2004) found lower. ‧. temperature makes investors feel risk seeking, which is relative to higher stock returns, while higher temperature makes investors feel risk aversion, which is relative to lower. y. Nat. er. io. sit. stock returns. Bassi, Colacito, and Fulghieri (2013) found good weather and sunshine are associated with upbeat mood, which makes people feel risk seeking. Hirshleifer and. n. al. Ch. i Un. v. Shumway (2003) found sunshine is significantly correlated with stock returns.. engchi. To the best of our knowledge, there have been very few researches to investigate the relationship between weather and disposition effect. However, there may exist correlation between these two factors, but not researched in previous studies. Besides, there are many studies indicate that weather influences investors’ risk preferences, which then affect their behavior. As a result, the purpose of this paper is to research the relationship between weather and disposition effect, and how weather influences disposition effect of different types of investors in the TAIFEX through its effect on risk attitudes. 2.

(11) 1.2 Objective From Choe and Eom (2009) and Li et al. (2013) studies, we learn that disposition effect vary across different types of traders in different countries’ futures market. As a result, the first purpose of this paper is to test whether the disposition effect vary across four types of investors (including domestic corporations, domestic individuals, domestic institutions, foreign institutions) in TAIFEX. We expect that domestic individuals would exhibit significant disposition effect. From Kahneman and Tversky (1979), Shefrin and Statman (1985), and Odean. 政治大 risk aversion makes both PGR and PLR increase. Besides, from Cao and Wei (2004) 立 (1998) studies, we conclude risk seeking makes both PGR and PLR decrease, while. ‧ 國. 學. and Bassi et al. (2013) studies, we find lower temperature, less rain, and more sunshine make investors exhibit risk seeking, while higher temperature, more rain, and less. ‧. sunshine make investors exhibit risk aversion. As a result, the second aim of this paper. sit. y. Nat. is to test how weather influences the disposition effect of four types of investors through. er. io. its effect on risk attitude. We expect lower temperature, less rain, and more sunshine. al. n. iv n C prices will continue to go up, whichhlead i Uand PLR decrease. Because of e ntogboth c hPGR make investors exhibit risk seeking. Believe information has not reflected in prices and. the asymmetric risk seeking degree of investors in gains and losses, the decreasing degree of PGR is larger than the decreasing degree of PLR, which leads to disposition effect decrease. On the other hand, higher temperature, more rain, and less sunshine make investors exhibit risk aversion. Believe information has reflected in prices and prices are too high now, leading to both PGR and PLR increase. Because of asymmetric risk aversion degree of investors in gains and losses, the increasing degree of PGR is larger than increasing degree of PLR, leading to disposition effect increase. 3.

(12) 2. Literature Review 2.1 Prospect Theory Kahneman and Tversky (1979) designed a series of experiments to observe people’s choices between different prospects, and they found that people’s behavior is inconsistent with expected utility theory. Hence, they developed an alternative model, called prospect theory, to demonstrate differences from expected utility theory, and to truly describe people’s decision making under risk. There are three important findings in prospect theory: First, the prospect theory uses the value function (figure 1), while. 政治大. the expected utility theory uses the utility function. Besides, instead of using simple. 立. probabilities in utility function, value function uses decision weights, which are. ‧ 國. 學. function of probabilities. People care about gains or losses relative to a reference point measured in the value function, rather than the level of wealth measured in the utility. ‧. function. Second, people exhibit risk aversion in gains, which means the value function. y. Nat. sit. is concave in the domain of gains; while exhibiting risk seeking in losses, meaning that. n. al. er. io. the value function is convex in the domain of losses. Prospect theory can explain. i Un. v. changes in risk attitude in the domain of gains and losses, however expected utility. Ch. engchi. theory cannot do so. Third, because people feel more severely in losses than in gains of equivalent absolute value, the slope of value function is steeper for losses than for gains. Kahneman and Tversky (1979) also developed the weighting function (figure 2) to describe people’s behavior. People obviously overweight certain outcomes, which is defined as certainty effect, and overweight events with few probabilities. These cause slope of weighting function becoming relatively steep both in near certainty and zero. The figures of both the value function and weighting function will be presented in next page. 4.

(13) Figure 1 Value Function. 立. 政治大. ‧ 國. 學 ‧. Figure 2 Weighting Function. n. er. io. sit. y. Nat. al. Ch. engchi. 5. i Un. v.

(14) 2.2 Disposition Effect Shefrin and Statman (1985) found investors tend to realize winners early and hold losers long, and they defined this phenomenon as disposition effect. They summarized four main elements: prospect theory, mental accounting, regret aversion and pride seeking, and self-control to explain this irrational behavior bias. First, prospect theory describes people care about gains or losses relative to a reference point measured in the value function. The value function is concave in gains, which means investors are risk aversion in gains and tend to sell winners early. Besides, the value function is convex. 政治大 Second, mental accounting describes investors can use tax swap to reduce tax liabilities, 立 in losses, meaning that investors are risk seeking in losses and tend to hold losers long.. ‧ 國. 學. which means selling a losing stock and purchasing a substitute stock in order to realize loss for tax purposes while maintaining same risk exposure. However, investors tend to. ‧. segregate different transactions into separate mental accounts. The tax swap needs to. sit. y. Nat. close an account at a loss, so investors are reluctant to do so. Third, regret aversion and. er. io. pride seeking describes investors avoid realizing losses because they feel regretful to. al. n. iv n C h emade profits makes them feel pride of having i U correctly in the past. Finally, n gthe c hdecision admit their previous judgment was wrong, while seeking gains realization because. self-control describes investors are reluctant to realize losses but doing so in December in purpose of tax benefits. Investors postpone selling losers until the end of each year when they require themselves doing so before deadline as a measure of self-control. Odean (1998) analyzed trading records for 10,000 discount brokerage house accounts during 1987-1993. He used the average purchase price as the reference point to determine gains and losses of every transaction. He considered there would be more winners stocks in the upward-moving market, so individual investors would tend to sell 6.

(15) more winners than losers. Dealing with this problem, Odean proposed to focus on frequency of winners and losers sales relative to opportunities to sell each. He calculated proportion of gains realized (PGR) and proportion of losses realized (PLR) to test disposition effect of individual investors. There are three important findings: First, PGR is significantly higher than PLR, which means individual investors have high disposition effect. Second, disposition effect is not prevalent in December because of tax benefit. Individual investors with positive tax rates postpone realizing gains because of tax liabilities generated, while realizing losses in purpose of reducing tax liabilities. Third, Individual investors buy stocks because of favorable information, and. 政治大. sell them at high prices (winners) because they believe information has reflected in. 立. price. On the other hand, they may continue to hold stocks if prices go down (losers),. ‧ 國. 學. believing information has not reflected. That is why individual investors tend to sell. ‧. winners and hold losers because they believe current losers will outperform (mean revert) current winners in the future. However, research results indicate the average. y. Nat. er. io. sit. excess returns of winners sold continue to outperform losers held in subsequent months. Locke and Mann (2000) analyzed transactions data during 1995 from the Chicago. n. al. Ch. i Un. v. Mercantile Exchange (CME). The evidence indicated that professional futures floor traders have disposition effect.. engchi. Frino, Johnstone, and Zheng (2004) demonstrated the disposition effect in Sydney Futures Exchange (SFE). They found that after controlling the different trader characteristics, the disposition effect of on-floor professional futures traders (local traders) is stronger than that of the non-local traders. Local traders are more likely to turn paper losses into either paper gains or realized gains than non-local traders in the following transactions because they have privileged short-term information advantage on order flows, which allows them to accurately predict short-term price shifts. 7.

(16) Choe and Eom (2009) analyzed the Korean stock index futures trading database from January 2003 to March 2005 and found that the disposition effect of individual investors is stronger than that of the institutional and foreign investors. Li et al. (2013) examined the disposition effect in Taiwan futures market. The result indicated that disposition effect of retail investors and foreign institutional investors are obvious, while that of proprietary investors is not significant. The phenomenon of mean reversion exists in the disposition effect of retail investors. Chen, Kim, Nofsinger, and Rui (2007) analyzed the disposition effect in China stock market. They found that both individual investors and institutional investors. 政治大. exhibit significant disposition effect. Besides, individual investors exhibit stronger. 立. disposition effect than institutional investors. They also compared China stock market. ‧ 國. 學. with U.S. stock market, and found that Chinese investors exhibit stronger disposition. ‧. effect than U.S. investors.. Brown, Chappel, Rosa, and Walter (2006) investigated Australian Stock Exchange. y. Nat. er. io. sit. data for investors in IPO and index stocks between 1995 and 2000. The results indicated that the disposition effect exists across investor classes. Especially, disposition effect of. n. al. Ch. i Un. v. individual investors is stronger than that of institutional investors, incorporated. engchi. companies investors, and foreign investors.. From previous studies, we learn that disposition effect vary across different types of traders in different countries’ stock and futures markets. One thing is common in both stock and futures markets is that individual investors exhibit significant disposition effect in both financial markets.. 8.

(17) 2.3 Weather Many researches indicate that weather conditions influence people’ mood, feelings, emotions, and risk attitude, which then affect people’ behavior and decision-making. Mellers and McGraw (2001) found that greater anticipated good weather make people feel more optimism and risk seeking, whereas less anticipated good weather make people feel more pessimism and risk aversion. Cao and Wei (2004) found that lower temperature makes investors feel risk seeking, while higher temperature makes investors feel risk aversion. They further examined the relationship between. 政治大 Taiwan), and found there existed negative correlation between temperature and returns. 立 temperature and the stock returns within eight international stock markets (including. ‧ 國. 學. Lower temperature is relative to higher stock returns and higher temperature is relative to lower stock returns. Bassi et al. (2013) implemented a lottery choice experiment to. ‧. observe risk preference of 262 participants from March 2011 to September 2012. They. sit. y. Nat. employed a multiple price list method, and found that good weather and sunshine are. er. io. associated with upbeat mood, which makes people feel risk seeking. Hirshleifer and. al. n. iv n C U to 1997. The result indicated hTaiwan) returns across 26 countries (including e n g cfrom h i1982 Shumway (2003) examined the relationship between sunshine and stock market index. morning sunshine in the city of a country's leading stock exchange is significantly correlated with stock returns.. 9.

(18) 3. Data and Methodology 3.1 Data Description We analyzed the trading data of Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) futures contracts traded on Taiwan Futures Exchange (TAIFEX) from January 2007 to December 2007. The underlying asset of TAIEX futures is TAIEX, which is value weighted index of all common stocks listed on Taiwan Stock Exchange (TWSE). The contract value of TAIEX futures is index points of TAIEX multiplied by 200 Taiwan Dollars (TWD). The trading time of TAIFEX is from 8:45 a.m. to 1:45 p.m.. 政治大. Taiwan time Monday through Friday of regular business days of TWSE. The daily price. 立. limit was +/-7% of the previous trading day’s settlement price in 2007. The delivery. ‧ 國. 學. months include the spot month, next calendar month, and next three quarterly months. The last trading day is the third Wednesday of the delivery month of each contract. All. ‧. futures contracts are automatically exercised on the expiration date and are settled with. y. Nat. sit. cash. Each investor should open a margin account and save the initial margin at the. n. al. er. io. broker. When the margin is below the maintenance margin, the margin account should. i Un. v. be refilled back to the initial margin level, otherwise the margin account will be closed. Ch. engchi. automatically by TAIFEX. The database offers the detailed trading information. We chose the information of the trading date and time, trading price, trading quantity, trading direction (buy or sell), trader types, and trading account to do further analyses. We chose the domestic corporations, domestic individuals, domestic institutions, and foreign institutions as our four types of investors, and the summarized information is presented in the Table 1. From Table 1, we can see that the total trading frequencies among four types of investors during 2007 were 11.7 million times, and the domestic individuals represent the most percentage (74.4%) in TAIFEX. 10.

(19) From Hirshleifer and Shumway (2003), Cao and Wei (2004), and Bassi et al. (2013) studies, we chose temperature, rain, and sunshine as our weather variables to do further analyses. Because the TAIFEX is located in Taipei, we collected Taipei weather data of monthly averaged temperature, monthly accumulated rain, and monthly accumulated sunshine from the Taiwan Central Weather Bureau (TCWB) during 2007. Table 2 presents the summarized monthly weather information.. Table 1 Trading frequency and percentage of four types of investors Types of Investors. Trading Frequency. 72,065 治政8,710,187 大. domestic corporations. 立. n. al. 111.4 70.5 262.5 198.0 96.6 709.9 156.9 576.2 367.8 280.3 155.5. Ch. engchi. sit. 17.3 18.7 19.7 21.2 26.4 28.0 30.4 28.7 27.5 24.8 20.7. er. io. 2007/01 2007/02 2007/03 2007/04 2007/05 2007/06 2007/07 2007/08 2007/09 2007/10 2007/11. y. Table 2 Summary statistics of weather variables Temperature(℃) Rain(mm) Sunshine(hr). Nat. Month. 74.40% 17.35% 7.63% 100%. ‧. ‧ 國. 2,031,325 893,328 11,706,905. 0.62%. 學. domestic individuals domestic institutions foreign institutions Sum. Trading Percentage. i Un. v. 94.7 128.8 77.4 84.7 172.6 105.1 196.0 150.6 146.6 100.1 64.0. 2007/12. 19.3. 30.3. 92.4. Mean Standard Deviation N. 23.6 4.5 12. 251.3 208,1 12. 117.8 40.9 12. 11.

(20) 3.2 Research Methodology This dataset records the trades by second. We tracked every investor’s purchase quantity and average purchase price as well as selling quantity and average selling price of each trade. We defined each investor as holding a net long (short) position according to the first trading direction (buy or sell) during the sample period until the investor closes the position. We calculated the average cost of every transaction by volume weighted average price for each investor according to every trading direction. The average cost of the net long position is the average purchase price, while that of the net. 政治大 net long or net short or no position (closes the position). When the investor of a net long 立. short position is the average selling price. At any time, an investor’s position is either. ‧ 國. 學. position continues to buy or the investor of a net short position continues to sell, the average cost is recalculated. On the other hand, when the investor of a net long position. ‧. sells or the investor of a net short position buys, the average cost remains the same.. sit. y. Nat. If the investor has the position, there must be papers gains or paper losses. We then. er. io. compare the trading price to the average cost to decide whether the position is traded at. al. n. iv n C U the position, the position is h e ndoes net long (short) position and the investor h iclose g cnot gains or at losses. When the trading price is higher (lower) than the average cost of the. counted as paper gains. In the meantime, the investor can close the position, and turn the paper gains into the realized gains. In contrast, when the trading price is lower (higher) than the average cost of the net long (short) position and the investor does not close the position, the position is counted as paper losses. If the investor closes the position, the paper losses will turn into the realized losses.. 12.

(21) We employed the methodology developed by Odean (1998) to measure every investor’s disposition effect of each transaction. We first calculated every investor’s paper gains, paper losses, realized gains, and realized losses of each transaction in order to calculate the PGR and PLR. Then, we used PGR minus PLR to measure the disposition effect (DE) of each investor.. Proportion of gains realized (PGR) =. Realized Gains Realized Gains + Paper Gains. Realized Losses 治政Realized Losses大+ Paper Losses. Proportion of losses realized (PLR) =. 立. (1). (2). ‧ 國. 學. Because weather information is the monthly data (presented in the Table 2), we separately sum every investor’s PGR, PLR, and disposition effect (DE) of each. ‧. transaction monthly according to four types of investors (including domestic. y. Nat. sit. corporations, domestic individuals, domestic institutions, and foreign institutions).. n. al. er. io. Table 3 presents the information of monthly PGR, PLR, and DE of four types of. i Un. v. investors during 2007. From Table 3, we can see that domestic individuals have the. Ch. engchi. highest disposition effect, which is consistent with the findings from Choe and Eom (2009) and Li et al. (2013).. 13.

(22) Table 3 Summary statistics of disposition effect (PGR-PLR) domestic corporations. domestic individuals. Month PGR PLR DE. PGR. PLR. 85,243 42,027 88,449 79,816 81,572 78,350 132,785. 65,784 31,224 70,977 61,003 61,378 60,539 103,598. 2007/01 2007/02 2007/03 2007/04 2007/05 2007/06 2007/07. 230 176 400 370 339 331 484. 277 171 406 366 345 286 378. -47 5 -6 4 -6 45 106. 2007/08 2007/09 2007/10 2007/11 2007/12. 404 417 559 440 387. 360 373 491 363 339. 43 87,102 63,918 43 85,701 70,463 68 97,629 80,100 77 118,680 104,133 48 127,959 109,995 92,109 24,795 12. PGR PLR DE PGR PLR DE. 19,459 280 267 12 455 508 -53 10,803 72 55 17 346 348 -2 17,472 67 60 7 449 314 135 18,812 30 28 3 420 369 51 20,195 32 33 -1 490 461 29 17,812 18 13 5 438 337 101 29,187 31 30 2 530 660 -130 23,184 15,238 17,529 14,547 17,964. 177 181 174 67 109. 政治大. 182 184 170 72 112. -5 -3 4 -6 -3. 767 813 342 673 474. 362 360 321 629 487. 406 454 21 44 -14. 73,593 18,524 103 100 3 516 430 87 22,653 4,558 82 82 7 154 119 174 12 12 12 12 12 12 12 12. ‧. Mean 378 346 32 St. Dev. 103 78 43 N 12 12 12. DE. foreign institutions. 學. ‧ 國. 立. domestic institutions. sit. y. Nat. io. er. To the best of our knowledge, there have been very few researches to investigate the effect of weather on disposition effect. Besides, some studies examined disposition. al. n. iv n C effect vary across different types ofh investors in different e n g c h i U countries’ stock and futures. markets (Locke and Mann, 2000; Frino et al., 2004; Brown et al., 2006; Chen et al., 2007; Choe and Eom, 2009 and Li et al., 2013). Others examined disposition effect, overconfidence, and representativeness bias (Chen et al., 2007), disposition effect and underreaction to news (Frazzini, 2006), disposition effect and momentum (Grinblatt and Hany, 2001). To the best of our knowledge, there have been very few researches to investigate the control variables of disposition effect. As a result, we only use weather variable as our independent variable to examine the effect of weather on disposition effect of four types of investors. 14.

(23) 3.3 Hypotheses Development According to the literature presented previously, we derive the following two hypotheses.. Hypothesis 1: Disposition effect may vary across four types of investors, and the domestic individuals would exhibit significant disposition effect.. From previous studies, we learn that the disposition effect exists among different. 政治大 that the disposition effect of individual investors is stronger than that of the institutional 立. types of investors in different countries’ futures market. Choe and Eom (2009) indicated. ‧ 國. 學. and foreign investors in the Korean stock index futures market. On the other hand, Li et al. (2013) found that the disposition effect of retail investors and foreign institutional. ‧. investors are significant, while that of the proprietary investors is not obvious in Taiwan. sit. y. Nat. futures market. As a result, we extend the concept derived from the previous studies. n. al. er. io. and consider that disposition effect may vary across four types of investors (including. iv n C the hdomestic e n g cindividuals h i U would. domestic corporations, domestic individuals, domestic institutions, and foreign institutions) in TAIFEX, and disposition effect.. 15. exhibit significant.

(24) Hypothesis 2: Weather may influence the disposition effect of four types of investors through its effect on risk preference, which is measured by PGR and PLR. The lower temperature, less rain, and more sunshine make four types of investors exhibit risk seeking, which leads to PGR, PLR, and disposition effect decrease. On the other hand, higher temperature, more rain, and less sunshine make four types of investors exhibit risk aversion, leading to PGR, PLR, and disposition effect increase.. Kahneman and Tversky (1979), Shefrin and Statman (1985), and Odean (1998) proposed that disposition effect indicates investors exhibit risk aversion in gains and. 政治大. believe information has reflected in prices, which lead to sell winners early and. 立. proportion of gains realized (PGR) is higher. On the other hand, investors exhibit risk. ‧ 國. 學. seeking in losses and believe information has not reflected in prices, which lead to hold. ‧. losers long and proportion of losses realized (PLR) is lower. When PGR is significantly higher than PLR, which means individual investors have high disposition effect (DE).. y. Nat. er. io. sit. As a result, we extend the concept derived from previous studies and consider that in gains, investors who exhibit risk seeking think information has not reflected in prices,. n. al. Ch. i Un. v. so prices will continue to go up. They tend to hold on gains, which makes PGR. engchi. decreases. In losses, investors who exhibit risk seeking also think information has not already reflected in prices, so prices will go up in the future. They tend to hold on losses, and believe losers will mean revert someday, which makes PLR decreases. Because of the asymmetric risk seeking degree of investors in gains and losses, the decreasing degree of PGR is larger than the decreasing degree of PLR, which leads to disposition effect decrease. On the other hand, in gains, investors who exhibit risk aversion think information has already reflected in prices, so prices are too high now. They tend to realize gains, which makes PGR increases. In losses, investors who exhibit risk aversion 16.

(25) tend to realize losses in order to limit losses, which makes PLR increases. Because of the asymmetric risk aversion degree of investors in gains and losses, the increasing degree of PGR is larger than the increasing degree of PLR, leading to disposition effect increase. In summary, risk seeking makes PGR, PLR, and DE decrease, while risk aversion makes PGR, PLR, and DE increase. Many researches indicate that weather conditions influence investors’ mood and risk attitude, which then affect investors’ behavior and decision-making. Cao and Wei (2004) found that lower temperature makes investors feel risk seeking, while higher temperature makes investors feel risk aversion. Bassi et al. (2013) found that good. 政治大. weather and sunshine are associated with upbeat mood, which makes people feel risk. 立. seeking. From the above studies, we conclude that lower temperature, less rain, and. ‧ 國. 學. more sunshine make investors exhibit risk seeking, while higher temperature, more rain,. ‧. and less sunshine make investors exhibit risk aversion.. To the best of our knowledge, there have been very few researches to investigate. y. Nat. io. sit. the relationship between weather and disposition effect. However, there are many. n. al. er. previous studies indicating that weather influences investors’ behavior and financial. Ch. i Un. v. decision-making through its effect on investors’ mood and risk attitude. As a result, we. engchi. extend the concept derived from the previous studies and consider the lower temperature, less rain, and more sunshine make investors exhibit risk seeking. Believe information has not reflected in prices and prices will continue to go up. Investors tend to hold on gains and losses, which lead to both PGR and PLR decrease. Because of the asymmetric risk seeking degree of investors in gains and losses, the decreasing degree of PGR is larger than the decreasing degree of PLR, which leads to disposition effect decrease. On the other hand, higher temperature, more rain, and less sunshine make investors exhibit risk aversion. Believe information has reflected in prices and prices 17.

(26) are too high now. Investors tend to realize gains and losses, leading to both PGR and PLR increase. Because of the asymmetric risk aversion degree of investors in gains and losses, the increasing degree of PGR is larger than the increasing degree of PLR, leading to disposition effect increase. Weather may influence disposition effect of four types of investors through its effect on risk preference, which is measured by PGR and PLR. Therefore, instead of directly examining the relationship between weather and disposition effect, we separately examine the relationship between weather and PGR, and the relationship between weather and PLR, which then lead to disposition effect.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. 18. i Un. v.

(27) 4. Empirical Results 4.1 Disposition Effect of Four Types of Investors We first sorted investors into four groups by their characteristics, which include domestic corporations, domestic individuals, domestic institutions, and foreign institutions. Then, we set the dummy variables for each type of investors to examine disposition effect of four types of investors. The result is presented in the table 4 with 11.7 million trading frequencies. As we expected, domestic individuals exhibit significant disposition effect, as p-value is below 0.01. This result is consistent with the. 政治大. findings from Choe and Eom (2009) and Li et al. (2013). However, the differences. 立. between our research and previous ones is that not only domestic individuals exhibit. ‧ 國. 學. significant disposition effect, but also domestic corporations exhibit significant disposition effect, as p-value is below 0.01. Moreover, domestic individuals have higher. ‧. disposition effect than domestic corporations. A possible explanation is that domestic. y. Nat. sit. individuals invest in the TAIFEX for the purpose of accumulating wealth. They avoid. n. al. er. io. realizing losses because they feel regretful to see their wealth decreasing, while seeking. i Un. v. gains realization because they feel pride to see their wealth increasing.. Ch. engchi. 19.

(28) Table 4 Disposition effect of four types of investors *indicates significant at 10%, **indicates significant at 5%, ***indicates significant at 1%.. The regression analysis takes the following form. DE = β1 DDC + β2 DDID + β3 DDIS + β4 DFIS Where DE is disposition effect, DDC is the dummy variable of domestic corporations, DDID is the dummy variable of domestic individuals, DDIS is the dummy variable of domestic institutions, and DFIS is the dummy variable of foreign institutions. Model. Disposition Effect (PGR-PLR). Domestic Corporations Domestic Individuals. 立. Domestic Institutions. 政治大. ‧ 國. ‧. 11,706,905. n. al. er. io. sit. y. Nat. 𝐴𝑑𝑗 − 𝑅 2 N. (216.75) 0.00000565 (0.02) 0.00006896 (0.17) 0.004 0.004. 學. Foreign Institutions 𝑅2. 0.00781*** (5.62) 0.02739***. Ch. engchi. 20. i Un. v.

(29) 4.2 The effect of weather on Disposition Effect We examined how weather influences the disposition effect (DE) through its effect on risk preference, which is measured by PGR and PLR. We orderly regressed weather to PGR, weather to PLR, and weather to DE with different samples, including domestic corporations, domestic individuals, domestic institutions, and foreign institutions. Because weather information is the monthly data (presented in the Table 2), we first separately sum every investor’s PGR, PLR, and DE of each transaction monthly according to four types of investors (presented in the Table 3).. 政治大 (weather), and found there is high correlation among independent variables. The results 立. We then ran the correlation coefficient analysis on the independent variables. ‧ 國. 學. are presented in the table 5. From table 5, we can see that there is 59% positive correlation between temperature and rain, while there is 72% positive correlation. ‧. between temperature and sunshine. Because there is high correlation among. sit. y. Nat. independent variables, we put each independent variable (temperature, rain, and. er. io. sunshine) respectively in the regression analysis without putting all the three. al. n. iv n C hTable regression results are presented in the e n g6, cTable h i 7,UTable 8, and Table 9.. independent variables simultaneously in order to prevent collinearity problem. The. Table 5 Correlation coefficients of independent variables. Temperature p-value Rain p-value Sunshine p-value. Temperature. Rain. Sunshine. 1. 0.592 0.042. 0.723 0.008. 0.592 0.042 0.723 0.008. 1. 0.055 0.866 1. 0.055 0.866. 21.

(30) In Table 6, we present the effect of weather on the disposition effect (DE) through its effect on PGR and PLR among domestic corporations. The positive relationship between temperature and disposition effect is significant at 5%. The temperature is positive relative to PGR, PLR, and DE. The results are consistent with our expectations. When the temperature increases, domestic corporations exhibit risk aversion. Believe information has reflected in prices and tend to realize gains and losses, leading to both PGR and PLR increase. Because of the asymmetric risk aversion degree in gains and losses, the increasing degree of PGR is more than the increasing degree of PLR, leading to DE increase. On the other hand,. 政治大. when the temperature decreases, domestic corporations exhibit risk seeking. Believe. 立. information has not reflected in prices and rend to hold gains and losses, leading to both. ‧ 國. 學. PGR and PLR decrease. Because of asymmetric risk seeking degree in gains and losses,. ‧. the decreasing degree of PGR is more than that of PLR, which leads to DE decrease. The positive relationship between the rain and disposition effect is not significant.. y. Nat. er. io. sit. The rain is positive relative to PGR, PLR, and DE. The results are consistent with our expectations. When the rain increases, both PGR and PLR will increase. The increasing. n. al. Ch. i Un. v. degree of PGR is more than increasing degree of PLR, leading to DE increase. On the. engchi. other hand, when the rain decreases, both PGR and PLR will decrease. The decreasing degree of PGR is more than the decreasing degree of PLR, which leads to DE decrease. The positive relationship between the sunshine and disposition effect is not significant. The sunshine is positive relative to PGR, negative relative to PLR, and positive relative to DE. The results are not consistent with our expectations. When the sunshine increases, PGR will increase but PLR will decrease, which leads to DE increase more. On the other hand, when the sunshine decreases, PGR will decrease, but PLR will increase, which leads to DE decrease more. 22.

(31) Table 6 Regression analysis of domestic corporations *indicates significant at 10%, **indicates significant at 5%, ***indicates significant at 1%. The regression analyses take the following forms. PLR = α + β Temperature + ε. DE = α + β Temperature + ε. PGR = α + β Rain + ε. PLR = α + β Rain + ε. DE = α + β Rain + ε. PGR = α + β Sunshine + ε. PLR = α + β Sunshine + ε. DE = α + β Sunshine + ε. 3. Model. 立 Panel B:PLR. ‧ 國. Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. Rain. (1.12). al. 0.243 0.167. 0.033 -0.064. 0.138 (0.17) 0.003 -0.097. 12. 12. 12. Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. Ch. engchi U. 2. 3. -97.497 (-1.69) 5.487**. 21.182 (1.04). 0.961 (0.02). Rain. 0.111 0.022. 0.016 -0.082. -0.123 (-0.21) 0.004 -0.095. 12. 12. 12. 23. 1. (2.28). 0.047 (0.4)n i v. n. 0.089 (0.58). io. Rain. Panel C:DE 212.178 334.394*** 360.823*** Intercept (1.74) (8.91) (4.86) 5.692 Temperature. ‧. Nat. (1.79). Model. 學. Panel A:PGR Intercept 114.68 355.576*** 361.784*** Intercept (0.77) (7.19) (3.66) Temperature 11.18 Temperature. 3. y. 2. sit. 1. 治政 1 2大. er. Model. PGR = α + β Temperature + ε. 0.042 (0.66). Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. 0.342 0.277. 0.042 -0.054. 0.262 (0.82) 0.063 -0.031. 12. 12. 12.

(32) In Table 7, we present the effect of weather on the disposition effect (DE) through its effect on PGR and PLR among domestic individuals. The positive relationship between the temperature and disposition effect is significant at 5%. The temperature is positive relative to PGR, PLR, and DE. The results are consistent with our expectations. When the temperature increases, domestic individuals exhibit risk aversion. Believe information has reflected in prices and tend to realize gains and losses, leading to both PGR and PLR increase. Because of the asymmetric risk aversion degree in gains and losses, the increasing degree of PGR is more than the increasing degree of PLR, leading to DE increase. On the other hand,. 政治大. when the temperature decreases, domestic individuals exhibit risk seeking. Believe. 立. information has not reflected in prices and tend to hold gains and losses, leading to both. ‧ 國. 學. PGR and PLR decrease. Because of asymmetric risk seeking degree in gains and losses,. ‧. the decreasing degree of PGR is more than that of PLR, which leads to DE decrease. The positive relationship between rain and disposition effect is not significant. The. y. Nat. er. io. sit. rain is negative relative to PGR, negative relative to PLR, and positive relative to DE. The results are not consistent with our expectations. When rain increases, both PGR. n. al. Ch. i Un. v. and PLR will decrease. The decreasing degree of PGR is less than that of PLR, which. engchi. leads to DE increase. On the other hand, when rain decreases, both PGR and PLR will increase. The increasing degree of PGR is less than that of PLR, leading to DE decrease. The positive relationship between the sunshine and disposition effect is significant at 10%. The sunshine is positive relative to PGR, negative relative to PLR, and positive relative to DE. The results are not consistent with our expectations. When the sunshine increases, domestic individuals exhibit different risk attitude in gains and losses. Domestic individuals exhibit risk aversion in gains, which leads to PGR increase, while exhibiting risk seeking in losses, leading to PLR decrease. Therefore, DE increase more. 24.

(33) Table 7 Regression analysis of domestic individuals *indicates significant at 10%, **indicates significant at 5%, ***indicates significant at 1%. The regression analyses take the following forms. PLR = α + β Temperature + ε. DE = α + β Temperature + ε. PGR = α + β Rain + ε. PLR = α + β Rain + ε. DE = α + β Rain + ε. PGR = α + β Sunshine + ε. PLR = α + β Sunshine + ε. DE = α + β Sunshine + ε. 0.039 -0.058. 0.035 -0.062. 12. 12. 12. Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. al. Ch. engchi. 1. 2. 3. Panel C:DE 80054*** Intercept 4808.434 17870*** 11091** (3.7) (0.78) (8.1) (3.08) Temperature 582.207** (2.26). -24.822 iv (-0.74) n U. Rain. 0.01 -0.09. 0.052 -0.043. -54.875 (-0.32) 0.01 -0.089. 12. 12. 12. 25. Model. ‧. 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. 8.366 (0.04) 0.000 -0.01. 79831*** (7.43). (0.31). n. Sunshine. Rain. io. -22.191 (-0.6). 62129 (1.65) 486.63. 3. 學. Panel B:PLR 91124*** Intercept (3.83) Temperature. (0.63) Rain. 立. y. Model. Nat. Panel A:PGR Intercept 66871 97687*** (1.65) (8.23) Temperature 1071.31. 3. sit. 2. 政治大 1 2. er. 1. ‧ 國. Model. PGR = α + β Temperature + ε. 2.605 (0.38). Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. 0.338 0.272. 0.014 -0.084. 63.129* (2.18) 0.321 0.253. 12. 12. 12.

(34) In Table 8, we present the effect of weather on the disposition effect (DE) through its effect on PGR and PLR among domestic institutions. The negative relationship between temperature and disposition effect is not significant. The temperature is negative relative to PGR, PLR, and DE. The results are not consistent with our expectations. When temperature increases, both PGR and PLR decrease. The decreasing degree of PGR is more than that of PLR, leading to DE decrease. On the other hand, when temperature decreases, both PGR and PLR increase. The increasing degree of PGR is more than that of PLR, leading to DE increase. The negative relationship between the rain and disposition effect is not significant.. 政治大. The rain is positive relative to PGR, positive relative to PLR, and negative relative to. 立. DE. The results are consistent with our expectations. When the rain increases, both PGR. ‧ 國. 學. and PLR will increase. The increasing degree of PGR is less than the increasing degree. ‧. of PLR, which leads to DE decrease. On the other hand, when the rain decreases, both PGR and PLR will decrease. The decreasing degree of PGR is less than the decreasing. y. Nat. er. io. sit. degree of PLR, which leads to DE increase.. The negative relationship between the sunshine and disposition effect is not. n. al. Ch. i Un. v. significant. The sunshine is negative relative to PGR, PLR, and DE. The results are. engchi. consistent with our expectations. When the sunshine increases, both PGR and PLR will decrease. The decreasing degree of PGR is more than the decreasing degree of PLR, which leads to DE decrease. On the other hand, when the sunshine decreases, both PGR and PLR will increase. The increasing degree of PGR is more than the increasing degree of PLR, which leads to DE increase. In summary, there is no significant relationship between weather and disposition effect of domestic institutions. A possible reason is that domestic institutions exhibit insignificant disposition effect, therefore weather may not affect their disposition effect. 26.

(35) Table 8 Regression analysis of domestic institutions *indicates significant at 10%, **indicates significant at 5%, ***indicates significant at 1%. The regression analyses take the following forms. PLR = α + β Temperature + ε. DE = α + β Temperature + ε. PGR = α + β Rain + ε. PLR = α + β Rain + ε. DE = α + β Rain + ε. PGR = α + β Sunshine + ε. PLR = α + β Sunshine + ε. DE = α + β Sunshine + ε. 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. 0.044 -0.052. 0.000 -0.1. -0.203 (-0.32) 0.01 -0.089. 12. 12. 12. Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. 98.424** (2.47). 121.866 (1.56). Model Panel C:DE Intercept Temperature. 1. 2. 3. 19.623* (1.93) -0.72. 4.328 (1.31). 5.202 (0.79). y (-0.54). al. (-1.69). 0.008 iv n (0.07) U. n. Sunshine. Rain. io. 0.002 (0.01). 3. ‧. Panel B:PLR Intercept 172.133 (1.28) Temperature -3.042. (-0.67) Rain. 立. 學. 127.067 (1.62). Model. Nat. Panel A:PGR Intercept 191.755 102.751** (1.43) (2.57) Temperature -3.762. 3. sit. 2. er. 1. 政治大 1 2. ‧ 國. Model. PGR = α + β Temperature + ε. Ch. engchi. Rain. 0.029 -0.069. 0.000 -0.01. -0.182 (-0.29) 0.008 -0.091. 12. 12. 12. 27. -0.007 (-0.64). Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. 0.223 0.145. 0.04 -0.056. -0.022 (-0.41) 0.016 -0.082. 12. 12. 12.

(36) In Table 9, we present the effect of weather on the disposition effect (DE) through its effect on PGR and PLR among foreign institutions. The positive relationship between the temperature and disposition effect is not significant. The temperature is positive relative to PGR, PLR, and DE. The results are consistent with our expectations. When the temperature increases, both PGR and PLR will increase. The increasing degree of PGR is more than the increasing degree of PLR, which leads to DE increase. On the other hand, when the temperature decreases, both PGR and PLR will decrease. The decreasing degree of PGR is more than the decreasing degree of PLR, which leads to DE decrease.. 政治大. The positive relationship between the rain and disposition effect is significant at. 立. 5%. The rain is positive relative to PGR, negative relative to PLR, and positive relative. ‧ 國. 學. to DE. The results are not consistent with our expectations. When the rain increases,. ‧. foreign institutions exhibit different risk attitude in gains and losses. Foreign institutions exhibit risk aversion in gains, which leads to PGR increase, while exhibiting. y. Nat. er. io. sit. risk seeking in losses, leading to PLR decrease. Therefore, DE increase more. The positive relationship between the sunshine and disposition effect is not. n. al. Ch. i Un. v. significant. The sunshine is positive relative to PGR, PLR, and DE. The results are not. engchi. consistent with our expectations. When the sunshine increases, both PGR and PLR will increase. The increasing degree of PGR is more than the increasing degree of PLR, which leads to DE increase. On the other hand, when the sunshine decreases, both PGR and PLR will decrease. The decreasing degree of PGR is more than the decreasing degree of PLR, which leads to DE decrease.. 28.

(37) Table 9 Regression analysis of foreign institutions *indicates significant at 10%, **indicates significant at 5%, ***indicates significant at 1%. The regression analyses take the following forms.. Model. PGR = α + β Temperature + ε. PLR = α + β Temperature + ε. DE = α + β Temperature + ε. PGR = α + β Rain + ε. PLR = α + β Rain + ε. DE = α + β Rain + ε. PGR = α + β Sunshine + ε. PLR = α + β Sunshine + ε. DE = α + β Sunshine + ε. 1. 2. 3. Model. 立. 政治大 1 2. 3. Model. 1. 2. 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. 0.189 0.108. 0.109 0.02. 1.012 (0.88) 0.072 -0.021. 12. 12. 12. Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. -0.269 iv n (-1.68) U. Rain. er. al. Ch. engchi. 0.001 -0.1. 0.221 0.143. 0.565 (0.62) 0.038 -0.059. 12. 12. 12. 29. 34.08 (0.21). (1.24). sit. (0.09). n. Sunshine. Rain. io. 0.244 (1.1). y. Nat. (1.53) Rain. ‧. ‧ 國. 學. Panel A:PGR Panel B:PLR Panel C:DE Intercept 169.264 454.973*** 397.164** Intercept 411.107* 497.303*** 363.085*** Intercept -241.843 -42.329 (0.73) (6.41) (2.79) (2.07) (9.68) (3.23) (-0.89) (-0.63) Temperature 14.733 Temperature 0.784 Temperature 13.949. 3. 0.514** (2.46). Sunshine 𝑅2 𝐴𝑑𝑗 − 𝑅 2 N. 0.133 0.046. 0.376 0.314. 0.448 (0.33) 0.011 -0.088. 12. 12. 12.

(38) 5. Conclusion In this paper, we demonstrated that different types of investors have different extent of disposition effect, which is influenced by weather. We employed the methodology developed by Odean (1998) to measure disposition effect. We found that domestic individuals exhibit significant disposition effect and tend to realize winners too early and hold losers too long. This result is consistent with the findings from Choe and Eom (2009) and Li et al. (2013). However, the differences between our research and previous ones is that not only domestic individuals exhibit significant disposition. 政治大 domestic individuals have higher disposition effect than domestic corporations. A 立 effect, but also domestic corporations exhibit significant disposition effect. Besides,. ‧ 國. 學. possible explanation is that domestic individuals invest in the TAIFEX for the purpose of accumulating wealth. They avoid realizing losses because they feel regretful to see. ‧. their wealth decreasing, while seeking gains realization because they feel pride to see. sit. y. Nat. their wealth increasing.. er. io. We further examined how weather influences disposition effect of four types of. n. al. iv n C U domestic h e neffect disposition g c hofi both. investors, through its effect on risk attitude. We found that temperature is positive relative to PGR, PLR, and. corporations and. domestic individuals. The results are consistent with our expectations. When temperature increases, both domestic corporations and domestic individuals exhibit risk aversion. Believe information has reflected in prices and prices are too high now. Investors tend to realize gains and losses, leading to both PGR and PLR increase. Because of the asymmetric risk aversion degree in gains and losses, the increasing degree of PGR is more than the increasing degree of PLR, leading to disposition effect increase. On the other hand, when the temperature decreases, domestic corporations 30.

(39) and domestic individuals exhibit risk seeking. Believe information has not reflected in prices and prices will continue to go up. Investors tend to hold gains and losses, which lead to both PGR and PLR decrease. Because of asymmetric risk seeking degree in gains and losses, the decreasing degree of PGR is more than the decreasing degree of PLR, which leads to disposition effect decrease. Besides, the rain is positive relative to PGR, negative relative to PLR, and positive relative to disposition effect of foreign institutions. The results are not completely consistent with our expectations. We found that when rain increases, foreign institutions exhibit different risk attitude in gains and losses. Foreign institutions exhibit risk. 政治大. aversion in gains, which leads to PGR increase, while exhibiting risk seeking in losses,. 立. leading to PLR decrease. Therefore, DE increase more.. ‧ 國. 學. Moreover, the sunshine is positive relative to PGR, negative relative to PLR, and. ‧. positive relative to disposition effect of domestic individuals. The results are not completely consistent with our expectations. When the sunshine increases, domestic. y. Nat. er. io. sit. individuals exhibit different risk attitude in gains and losses. Domestic individuals exhibit risk aversion in gains, which leads to PGR increase, while exhibiting risk. n. al. Ch. i Un. v. seeking in losses, leading to PLR decrease. Therefore, DE increase more.. engchi. The empirical results indicated that weather influences disposition effect of different types of investors. However, there is no significant relationship between weather and disposition effect of domestic institutions. A possible explanation is that domestic institutions exhibit insignificant disposition effect, therefore weather may not influence their disposition effect. In conclusion, we found that weather may influence disposition effect of different types of investors, through its effect on risk attitude. We recommended that further studies can lengthen the research period to investigate the research thoroughly. 31.

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