Article Abstract

Evidence of the disposition effect and its negative impacts on equity funds is well established. Many managers continue to sell winners too quickly and hold on to losers too long. Efforts to eliminate these and other behavioral tendencies appear to be limited in their impact. Weak feedback regarding which decisions are helping generate excess returns and which aren’t is a major stumbling block that inhibits such improvement efforts. So too is the resistance to change frequently present when change is unconsciously perceived as more risky than the status quo. This paper argues that the use of newer analytics, in particular the vivid visualizations of manager decisions with individual holdings, can greatly increase the odds that a manager will develop greater self-awareness and actually improve.

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