IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 21, Issue 2. Ver. IV (February. 2019), PP 16-21 www.iosrjournals.org DOI: 10.9790/487X-2102041621 www.iosrjournals.org 16 | Page Disposition Effect, Endowment Effect, Attachment Bias and Investment Advisers Anastasios D. Konstantinidis, Androniki Katarachia, Thomas Siskou Technological Education Institute of Western Macedonia ,Greece, Corresponding Author: Anastasios D. Konstantinidis Abstract: In the context of stock market decision-making and investment processes, the impact of the disposition effect, the endowment effect and the attachment bias is great. The present research, based on answers given by 81 certified stock exchange executives, demonstrates the effect of the above biases on the subjects’ rational investment decisions and choices and the significant role of certified executives in the operation and processes of the stock market. Keywords: Behavioral Finance, Disposition Effect, Endowment Effect, Attachment Bias, Investment Advisers, Stock Market --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 01-02-2019 Date of acceptance:18-02-2019 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction Behavioural Finance is the most comprehensive financial theory. Based on other disciplines (sociology, psychology) enables the description of the impact of emotional errors and biases on investment choices. Unlike the efficient market hypothesis, it has demonstrated that investors do not always aim at rationality, profit making and maximum utility, but rely on irrational and wrong investment decisions. In addition, markets are not entirely efficient, but are likely to operate inefficiently for long periods of time, as often demonstrated by stock bubbles and recurring stock crashes. The extant literature of behaviour is focused on three major biases, which have significantly affected and hampered rational investment decision making. Recognizing the significance of the disposition effect, the endowment effect and the attachment bias, and the impact they have on the investment decisions and choices of the surveyed certified stock exchange executives, we discover the import of the Behavioural Finance and its dominant position among other financial theories. II. Disposition effect The disposition effect is defined as people‘s tendency to make irrational choices and decisions, which is mainly explained by the fact that ―people dislike incurring losses much more than they enjoy making gains‖ (Shefrin, Statman, 1985). In the context of capital investment, the disposition effect describes the investors‘ tendency to hold on to stocks which have lost value (in terms of current stock market prices) and are willing to sell those which have risen in value (Montier, 2007). Investors favour safe gains and satisfaction rather than risk-seeking choices. In this respect, when they realize that their stocks are losers, they do not tend to sell, but opt for holding on to loss-making choices until they yield gains. III. Endowment effect The endowment effect involves the individuals‘ tendency to attach extra value to the objects or assets they own. People often demand a much higher price when they sell than they would be willing to pay to buy it (Nofsinger, 2001), which is also true for the stock market, where stocks and, in general, securities are valued higher when they are in the possession of investors rather than when they are not. On the other hand, investors tend to keep the securities they inherit instead of investing in new investment products, which are most suited to their own needs (Nofsinger, 2001).