César Valentim de Oliveira Carvalho Júnior

THE INFLUENCE OF DISPOSITION EFFECT IN INDIVIDUAL INVESTMENT DECISIONS

We investigated the occurrence of the disposition effect in individual investment decisions, to identify if the presentation of analysts recommendations and accounting informations reduces this effect and improves the results of negotiations on the financial market. Krishnan and Booker (2002) indicate that the presence of the analysts recommendation reduces the error provision for situations in which the gains of operations, but not for losses. When additional information is presented the error reduces to the two situations. For this purpose, a survey was conducted consisting of presentation scenarios that incorporated situations of selling or holding shares in the investment portfolio of individuals. The data were collected in two groups of respondents, graduate students in Accounting and postgraduate degree students in Controllership. The analysis of variance (ANOVA) was used in the comparison of three scenarios: with recommendations of analysts and financial information; only with analyst recommendations; and without additional information. Multiple linear regression was used to investigate the impact of independent variables such as age, gender, investments, type of scenario, investor profile and market conditions on the investment decision. The comparison of scenarios indicated that recommendations of analysts and financial information produced no significant effects on investment decisions in favorable markets, since they were no longer affected by the disposition effect. In unfavorable markets, the results differ from what is advocated in the literature and show that the analyst recommendations increase the disposition effect occurrence on investment decisions.