Qiu, J., van de Kuilen, G., Weitzel, U. and Xu, Y. (2025). Irrational Beliefs May Drive the Disposition Effect: Evidence from Financial Professionals Journal of Financial and Quantitative Analysis.

We administer a theory-driven, lab-in-the-field experiment to study the disposition effect among financial professionals. Our novel design identifies, at the individual participant level, key behavioral drivers of the disposition effect: reference-dependent risk attitudes (“tastes”), second-order uncertainty attitudes (including “ambiguity”), and subjective likelihood assessments (“beliefs”). Among the 237 professionals in our sample, 34% exhibited the disposition effect, which seems to be primarily driven by non-Bayesian beliefs. Our experimental results suggest that, when faced with new information about their asset{\textquoteright}s performance, financial professionals failed to update their beliefs sufficiently, leading them to sell the asset that gained (lost) value more (less) readily.