SOURCE: Investment Management Consultants Association

November 07, 2007 19:07 ET

IMCA Journal of Investment Consulting Publishes New Paper Considering "How the Disposition Effect and Momentum Impact Investment Professionals"

DENVER, CO--(Marketwire - November 7, 2007) - An article in the Summer/Fall 2007 issue of the Journal of Investment Consulting, published by the Investment Management Consultants Association (IMCA), talks about why the disposition effect and momentum are key determinants in the separation of outperforming investors from underperforming investors.

In "How the Disposition Effect and Momentum Impact Investment Professionals," Hersh Shefrin, Ph.D., highlights the disposition effect literature that are of special interest to investment professionals. More than twenty years ago, Dr. Shefrin and Meir Statman, Ph.D., coined the term "disposition effect" to describe the predisposition of investors to sell their winners too early and to ride their losers too long. Their initial work discussed the behavior of investment professionals and focused primarily on the behavior of individual investors. It did not seek to describe any implications for market pricing.

According to Dr. Shefrin, recent research concludes that the disposition effect impacts both investment professionals and security prices, both directly and indirectly. The direct effect involves investment professionals tending to sell their winners too quickly and/or riding their losers too long. The indirect effect involves momentum in pricing that in part stems from some investors behaving in accordance with the disposition effect.

Hersh Shefrin, Ph.D., is the Mario L. Beloitt Professor of Finance at the Leavey School of Business, Santa Clara University. He earned a B.S. (honors) in economics and mathematics from the University of Waterloo and a Ph.D. from the London School of Economics. Dr. Shefrin has published widely on a wide range of topics in mathematics, finance, and economics, and he is best known for his work in behavioral finance.

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Founded in 1985 and located in Denver, CO, the Investment Management Consultants Assn. Inc. serves over 6,800 members and over 5,400 CIMA designees. IMCA offers the only advanced designation designed specifically for investment consultants, the Certified Investment Management Analyst(SM) (CIMA®) program. IMCA also offers an advanced wealth management designation for advisors who work with high-net-worth clients, the Chartered Private Wealth Advisor(SM) (CPWA(SM)). IMCA hosts seven educational conferences each year and several certificate programs that are attended by over 4,000 financial professionals every year.

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