The systematic biases in decision-making in the mutual-fund markets: Market states and disposition effect

Figures & data

Table 1. Market states

Start date	Beginning TAIEX	End date	End TAIEX	Rate of change in the TAIEX (%)	Number of months	Total number of months	% share of sample period
1. Bull market
21 January 2009	4247.97	31 December 2009	8188.11	92.75	11	16	26.67
31 August 2010	7616.28	28 January 2011	9145.35	20.08	5
2. Bear market
31 December 2007	8506.28	21 January 2009	4247.97	−50.06	13	23	38.33
28 January 2011	9145.35	30 November 2011	6904.12	−24.51	10
3. Neutral market
31 December 2009	8188.11	31 August 2010	7616.28	−6.98	8	21	35
30 November 2011	6904.12	28 December 2012	7699.5	11.52	13
Total						60	100

Figure 1. TAIEX (2007/12/31–2012/12/31).

Data source: Taiwan Economic Journal (TEJ).

Table 2. Descriptive statistics

		RED	Rate of change over the past year (%)	STD	TOR (%)
Total funds (N = 10,200)	Mean	4.05%	−0.21	24.97	21.85
	Standard deviation	4.69%	28.07	9.00	20.92
	Minimum	0.00%	−64.84	5.32	−367.47
	Maximum	126.79%	121.50	51.11	277.81
Stock funds (N = 8580)	Mean	4.02%	−0.51	26.85	22.30
	Standard deviation	4.38%	29.74	8.38	21.62
	Minimum	0.00%	−64.84	8.32	−367.47
	Maximum	86.90%	121.50	51.11	277.81
Balanced funds (N = 1620)	Mean	4.22%	1.37	15.01	19.50
	Standard deviation	6.08%	16.48	4.45	16.53
	Minimum	0.00%	−38.50	5.32	−17.18
	Maximum	126.79%	64.17	34.59	99.88

Table 3. Pearson correlation coefficient matrix

Variables	RED	Winner	Loser	STD	TOR
RED	-
Winner	0.193***	-
Loser	0.078***	0.399***	-
STD	0.059***	0.108***	−0.320***	-
TOR	0.017*	−0.044***	−0.069***	0.131***	-

***p < .01; **p < .05; *p < .1

Table 4. Multiple regression analysis of the disposition effect

	Entire Sample	Three market states			Two types of mutual funds		Bull market		Bear market		Neutral market
							Stock fund	Balanced fund	Stock fund	Balanced fund	Stock fund	Balanced fund
Variables	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8	Model 9	Model 10	Model 11	Model 12
WINNER	0.181***	0.102***	0.291***	0.264***	0.193***	0.182***	0.099***	0.134**	0.372***	0.227***	0.280***	0.213***
	(<0.001)	(<0.001)	(<0.001)	(<0.001)	(<0.001)	(<0.001)	(<0.001)	(0.015)	(<0.001)	(<0.001)	(<0.001)	(<0.001)
LOSER	0.022*	0.111***	−0.111***	0.110***	0.036***	−0.084***	0.124***	−0.028	−0.112***	−0.195***	0.113***	0.092*
	(0.062)	(<0.001)	(<0.001)	(<0.001)	(0.004)	(0.004)	(<0.001)	(0.616)	(<0.001)	(<0.001)	(<0.001)	(0.052)
STD	0.044***	0.012***	0.061***	−0.046**	0.072***	0.058**	−0.003	0.071	0.123***	0.066	−0.035	−0.027
	(<0.001)	(<0.001)	(0.001)	(0.021)	(<0.001)	(0.026)	(0.883)	(0.148)	(<0.001)	(0.121)	(0.130)	(0.558)
TOR	0.021**	0.020	0.013	0.025	0.012	0.064**	0.011	0.076	0.014	0.054	0.004	0.117***
	(0.032)	(0.302)	(0.410)	(0.122)	(0.251)	(0.010)	(0.610)	(0.116)	(0.388)	(0.177)	(0.842)	(0.007)
F值	105.030***	22.25***	64.406***	94.802***	113.181***	15.696***	21.113***	2.970**	88.256***	7.737***	91.72***	12.696***
	(<0.001)	(<0.001)	(<0.001)	(<0.001)	(<0.001)	(<0.001)	(<0.001)	(0.019)	(<0.001)	(<0.001)	(<0.001)	(<0.001)
Adj-R^2	0.039	0.03	0.061	0.095	0.05	0.035	0.034	0.018	0.096	0.042	0.108	0.076

(a) Model 1 was the regression for the entire sample. Models 2–4 were regression models for bull, bear, and neutral markets without considering the types of mutual funds. Models 5 and 6 were regression models for stock and balanced funds without considering the market states. Models 7–12 were regression models based on three market states and two types of mutual funds.

(b) WINNER is the proxy variable for winning funds; LOSER is the proxy variable for losing funds; STD indicates annualized standard deviation, representing the fund risk; TOR denotes mutual fund turnover rate.

(c) ***p < .01; **p < .05; *p < .1

Table 5. Summary of regression results

Conclusion	Entire market	Bull market	Bear market	Neutral market
Mutual fund overall	Disposition effect	Disposition effect	No	Disposition effect
Stock fund	Disposition effect	Disposition effect	No	Disposition effect
Balanced fund	No	No	No	Disposition effect

Table 6. Difference analysis between types of mutual funds

Market states	Type of mutual fund	Mean	t values
Bull market	Stock fund	0.053	0.513 (0.608)
	Balanced fund	0.049
Bear market	Stock fund	0.044	1.704* (0.089)
	Balanced fund	0.039
Neutral market	Stock fund	0.034	−0.487 (0.627)
	Balanced fund	0.035

***p < .01; **p < .05; *p < .1