Graduation Year


Document Type




Degree Name

Doctor of Philosophy (Ph.D.)

Degree Granting Department

Business Administration

Major Professor

Jared Williams, Ph.D.

Committee Member

Daniel Bradley, Ph.D.

Committee Member

Christos Pantzalis, Ph.D.

Committee Member

Joseph Engelberg, Ph.D.


Investor Behavior, Natural Disasters, Portfolio Performance, Realization Utility


This dissertation contains two essays that shed new light on the disposition effect – that is, the tendency for investors to be especially eager to realize gains over losses. The first essay combines county-level natural disaster data with individual investor transactions to document an increased disposition effect for investors impacted by a natural disaster. This effect is increasing in disaster severity and decreasing in the length of time following the event, suggesting that extreme natural disasters can significantly influence investor behavior, especially in the short term. These findings are not explained by liquidity needs, tax incentives, or informed trading. The effect strengthens with local stocks and investors’ duration at their residence. Moreover, the increased disposition effect of disaster-affected investors is consistent with investors deriving utility from environmental damages and realized gains/losses. In the second essay, I find no material disposition effect for a stock if the remaining portfolio is at a gain. I find a large disposition effect only when the remaining portfolio is at a loss. This portfolio-driven disposition effect is not explained by extreme returns, portfolio rebalancing, simultaneous transactions, or investor sophistication/skill. The evidence suggests investors’ utility comes from both paper gains and losses and realized gains and losses; and when their portfolio has paper losses, they compensate by realizing gains. Together, these essays find the disposition effect increases (decreases) with negative (positive) experiences. These findings suggest investors exhibit the disposition effect to offset negative utility from other salient channels, even though this behavior is costly to their future portfolio performance.