The disposition effect is an anomaly discovered in behavioral finance

Behavioral finance

Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...

. It relates to the tendency of investors to sell shares whose price has increased, while keeping assets that have dropped in value. Investors are less willing to recognize losses (which they would be forced to do if they sold assets which had fallen in value), but are more willing to recognize gains.

See also

• Endowment effect
  Endowment effect
  In behavioral economics, the endowment effect is a hypothesis that people value a good or service more once their property right to it has been established. In other words, people place a higher value on objects they own than objects that they do not...
  
  
• Prospect theory
  Prospect theory
  Prospect theory is a theory that describes decisions between alternatives that involve risk i.e. where the probabilities of outcomes are known. The model is descriptive: it tries to model real-life choices, rather than optimal decisions.-Model:...
  
  
• Status quo bias
  Status quo bias
  The status quo bias is a cognitive bias for the status quo; in other words, people tend not to change an established behavior unless the incentive to change is compelling...
  
  
• Loss aversion
  Loss aversion
  In economics and decision theory, loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains....
  
  
• sunk cost
  Sunk cost
  In economics and business decision-making, sunk costs are retrospective costs that have already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken...
  
  is a kind of disposition effect