Do Behavioral Biases Affect Order Aggressiveness?

We extend previous studies on the effect of behavioral biases on investor hold/sell decisions, and examine whether behavioral biases affect the order submission strategies. We use a unique database provided by the Shanghai Stock Exchange, which contains order submissions and executions as well as trading records of all investors. We find investors are less aggressive in submitting sell orders for stocks that experienced losses, and more aggressive in submitting sell orders for stocks that experienced gains. The sell order aggressiveness is negatively related to the size of losses, but has a quadratic relationship with the size of gains. Results are consistent with the combination of the disposition and the house money effects. © The Authors 2017. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved.