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Kansara, A.P., Sung, M.-C., Ma, T. and Johnson, J.E.V. 
ORCID: 0000-0003-3594-4696,
2020.
Towards a better understanding of the full impact of the left digit effect on individual trading behaviour: unearthing a trading profit effect.
European Journal of Finance.
ISSN 1351-847X
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Abstract
Investors’ perceptions of price have been shown to be disproportionately affected by the left-most digit(s). However, a similar left digit effect (LDE) in relation to another important determinant of investors’ behaviour (i.e. trading profit) has not been explored. We examine over 7,314,570 million trades made by 25,766 individuals and find a LDE in profit that is 1.71 times stronger than that related to closing price; suggesting that individuals focus more on left digits in profit than price when deciding when to close a trade. In addition, we observe a positive synergistic relationship between the LDE related to profit and price, suggesting that its total influence may result in losses of billions of dollars per financial year for investors. We suggest that these results make a strong case for educating investors against this bias.
| Item Type: | Journal article | ||||||
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| Publication Title: | European Journal of Finance | ||||||
| Creators: | Kansara, A.P., Sung, M.-C., Ma, T. and Johnson, J.E.V. | ||||||
| Publisher: | Routledge | ||||||
| Date: | 26 January 2020 | ||||||
| ISSN: | 1351-847X | ||||||
| Identifiers: |
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| Divisions: | Schools > Nottingham Business School | ||||||
| Record created by: | Jonathan Gallacher | ||||||
| Date Added: | 19 Dec 2019 11:33 | ||||||
| Last Modified: | 26 Jul 2021 03:00 | ||||||
| URI: | https://irep.ntu.ac.uk/id/eprint/38893 |
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