Disposition Effect
The tendency for investors to sell winning assets too early and hold losing assets too long — driven by loss aversion and the desire to avoid locking in a loss.
EverydayConcepts.io
Origin
Canadian-born economist Hersh Shefrin and Israeli-American finance professor Meir Statman identified and named the disposition effect in their 1985 paper "The Disposition to Sell Winners Too Early and Ride Losers Too Long," published in The Journal of Finance. Both were professors at Santa Clara University's Leavey School of Business. They grounded the concept in prospect theory — specifically loss aversion, mental accounting, regret avoidance, and self-control — building on the foundational work of Daniel Kahneman and Amos Tversky.
Updated February 22, 2026