The paper by Terrance Odean tests the disposition effect, which refers to the tendency of investors to hold onto losing investments longer and sell winning investments sooner. Using trading records from 10,000 accounts at a large discount brokerage house, Odean finds that investors are more likely to realize gains than losses. This behavior is not driven by rebalancing or avoiding trading costs, and it leads to lower after-tax returns for taxable investments. The disposition effect is evident throughout the year, with tax-motivated selling most pronounced in December. Odean also examines alternative explanations, such as investors' belief that current losers will outperform winners or their desire to rebalance portfolios, but finds that these factors do not fully explain the disposition effect. The study concludes that investors' reluctance to realize losses is consistent with prospect theory and a mistaken belief in mean reversion.The paper by Terrance Odean tests the disposition effect, which refers to the tendency of investors to hold onto losing investments longer and sell winning investments sooner. Using trading records from 10,000 accounts at a large discount brokerage house, Odean finds that investors are more likely to realize gains than losses. This behavior is not driven by rebalancing or avoiding trading costs, and it leads to lower after-tax returns for taxable investments. The disposition effect is evident throughout the year, with tax-motivated selling most pronounced in December. Odean also examines alternative explanations, such as investors' belief that current losers will outperform winners or their desire to rebalance portfolios, but finds that these factors do not fully explain the disposition effect. The study concludes that investors' reluctance to realize losses is consistent with prospect theory and a mistaken belief in mean reversion.