Investor characteristics and the effect of disposition bias on the Tunisian stock market

Drawing evidence from financial theory, which suggests the tendency of investors to sell winning stocks quickly and to hold on to losing ones for a long time, this is the first study to investigate the relevance of the effect of disposition bias on individual investors in the Tunisian equities market. Our analysis is carried out on a sample of 925 Tunisian traders over the period 2009–2014 to find out how gender, age, investor characteristics, portfolio management types, bull or bear market conditions, and external factors are related to the intensity of the disposition effect by separately tracking their trading transaction histories. The findings show mainly robust evidence of disposition bias across different groups of investors. In particular, the study reveals that male and younger Tunisian investors suffer from a strong disposition bias compared with their counterparts, female and mature investors. Furthermore, our results show that other behavioral biases, including market trading volume, the value of a share traded, trading frequency, trading in round numbers, and the investor's overall level of portfolio diversification depend on the disposition effect. Concerning the bull and bear market issue, we divided our data period into bull and bear markets to observe the effect of disposition bias every month of the year, and we found that this effect is even more pronounced in bull markets. Keywords: Behavioral finance, Disposition effect, Investor characteristics, Market trends, Tunisian investors, Tunisia's stock market, JEL Classification: G11, G14