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Business & Information Systems Engineering
Erschienen in: Business & Information Systems Engineering 6/2015

12.08.2015 | Research Paper

Beware of Performance Indicators

How Visual Cues Increase the Disposition Effect

verfasst von: Dipl.-Wi.-Ing. Tobias T. Kranz, Dr. Florian Teschner, Prof. Dr. Christof Weinhardt

Erschienen in: Business & Information Systems Engineering | Ausgabe 6/2015

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Abstract

Online trading interfaces are important instruments for retail investors. For sound reasons, regulators obligate online brokers to inform customers about certain trade related risks. Research has shown that different behavioral biases can decrease traders’ performance and hence lead to pecuniary losses. The disposition to hold losing stocks too long and sell winning stocks too early (‘disposition effect’) is such a deviation from rational behavior. The disposition effect is analyzed for the prediction market ‘Kurspiloten’ which predicts selected stock prices and counts nearly 2000 active traders and more than 200,000 orders. We show that the disposition effect can be aggravated by visual feedback on a trader’s performance via colored trend direction arrows and percentages. However, we find no evidence that such an interface modification leads to higher activity. Furthermore, we can not confirm that creating awareness of the disposition effect with textual information is suited to decreasing its strength.
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Fußnoten
1
In an experiment based on (Lim and Benbasat 1996), they explore the effectiveness of decision support systems in the financial context to lower cognitive biases. Therefore, they use interactive feedback as well as selected different graphical representations in investment scenarios.
 
2
As the disposition effect’s definition by Shefrin and Statman (1985) describes rather a behavioral pattern than a precise way of quantification, literature has adopted different approaches to verify the disposition effect’s existence and measure its extent. As the methodology used in the work at hand (cf. Sect. 5) is largely based on Odean (1998), for comparison reasons we report the extent of the DE for studies that use a similar approach as the difference of PGR-PLR.
 
3
Due to legal restrictions the market had to rely on play money; nonetheless ‘€’ was used as currency name. To avoid confusion in this article ‘P€’ is used as currency sign for play money and ‘€’ for real money.
 
4
Due to a bad money/stocks-ratio we introduced a second account for each user called “Geldspeicher” (engl. ’Money Bin’). Starting on 23 October 2011 all money exceeding 10,000,000P€ is booked to the Money Bin in the weekly payout procedure and can not be used for trading anymore. Nevertheless, the money contained in the Money Bin is considered for the ranking.
 
5
As Odean (1998) had no information on when the users in his dataset could possibly sell a certain stock, he chooses to count paper gains/losses only on days when a user sells at least two stocks of his portfolio. The idea behind this approach is to derive the points in time (here: days) a user was logged into his account by analyzing the trading history. The assumption is that users have seen their portfolio on such days and – if they decided not to sell certain stocks – preferred a paper gain/loss (or neither). Since we have available the users’ session data, we do not need to derive that information from trade data and thus ‘directly’ count stocks that are not sold within a session as paper loss/gain (or neither).
 
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Metadaten
Titel
Beware of Performance Indicators
How Visual Cues Increase the Disposition Effect
verfasst von
Dipl.-Wi.-Ing. Tobias T. Kranz
Dr. Florian Teschner
Prof. Dr. Christof Weinhardt
Publikationsdatum
12.08.2015
Verlag
Springer Fachmedien Wiesbaden
Erschienen in
Business & Information Systems Engineering / Ausgabe 6/2015
Print ISSN: 2363-7005
Elektronische ISSN: 1867-0202
DOI
https://doi.org/10.1007/s12599-015-0399-8

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