Annals of Finance

, Volume 5, Issue 1, pp 1–14 | Cite as

Behavior in a simplified stock market: the status quo bias, the disposition effect and the ostrich effect

  • Alexander L. BrownEmail author
  • John H. Kagel
Research Article


Previous literature suggests specific behavioral tendencies cause investors to deviate from optimal investing. We investigate three such tendencies in a simplified stock market. Subjects do trade for better stocks, but do not reach their maximum potential earnings, most commonly because they choose to ignore information and continue to hold on to a stock regardless of its performance. The results support the predictions of the status quo bias, but not the ostrich effect or the disposition effect.


Behavioral finance Experimental economics Status quo bias Self-signaling Disposition effect 

JEL Classification

C91 D01 D53 D83 


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Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  1. 1.Division of the Humanities and Social SciencesCalifornia Institute of TechnologyPasadenaUSA
  2. 2.Department of EconomicsOhio State UniversityColumbusUSA

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