Fabio Mattos

Do producers exhibit disposition effect? Evidence from grain marketing

The disposition effect is one of the most common types of behavior documented in inancial markets, and reflects the notion that investors tend to hold losing positions too long and close winning positions too fast. This idea can also be applied to grain marketing. The disposition effect would be related to whether producers sell their grain more readily when prices are “high” and wait longer when prices are “low”. This question is relevant because this type of behavior can affect marketing performance. If grain is sold too early, producers can miss opportunities to sell at higher price later. If producers hold their grain too long, price can go down and they will end up selling at a lower prices. Examination of pricing strategies of 15,564 wheat producers between 2003/04 and 2008/09 shows evidence of disposition effect in their marketing decisions. They seem to be eager to sell when the price offered by marketing contracts is above their reference price, and wait longer to sell when the price offered by marketing contracts is below their reference price.

Applications of Behavioral Finance to Entrepreneurs and Venture Capitalists: Decision Making Under Risk and Uncertainty in Futures and Options Markets

A key dimension of entrepreneurship is risk-taking behavior, and often it is assumed that entrepreneurs exhibit a higher tolerance for risk than non-entrepreneurs. However, empirical evidence provides mixed findings, raising the question whether entrepreneur’s judgment is influenced by emotion and heuristics which leads them to misperceive the risk in the market. Our findings support this idea. Empirical results indicate these investors generally take more risk than would be anticipated. Higher risk propensity is due to probability weighting and is also consistent with the idea that entrepreneurs and possible venture capitalists perceive risky situations more optimistically than non-entrepreneurs.