Disposition Effect and Flippers in the Bursa Malaysia

摘要

This paper discusses whether investors' decisions to flip or to hold on to their initial public offerings (IPOs) in the immediate aftermarket are subject to the disposition effect as introduced by Shefrin and Statman [1985]. Using 132 IPOs listed on the Main Board of the Bursa Malaysia, this study found that the disposition effect did indeed exist among IPO investors in the Bursa Malaysia. Investors were found to be 2.64 times more willing to flip winning compared to losing IPOs. Further, after scrutinizing the long run ex-post performance of the winners' and losers' portfolios, it was found that the tendency for investors to flip winning IPOs arising from their “fear of regret” was justifiable. Nonetheless, an investor's decision to hold on to losers was found to be a suboptimal behavior. This was because the ex-post performance of the losers was not significantly better than their initial performance. Finally, this study also uncovered that investors' mean revert anticipation was not justified by the ex-post return.