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    • DOI: 10.18178/JOEBM
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HOME > Archive > 2025 > Volume 13 Number 3 (2025) >
JOEBM 2025 Vol.13(3): 259-268
DOI: 10.18178/joebm.2025.13.3.877

Overreaction, Investor Anxiety, and Anomalies in the A-share Disposition Effect

Yong Pan 1, Rujie Fan 2, and Gongtao Zhang 3
1. Faculty of Business and Communications, INTI International University, Nilai, Malaysia
2. School of Economics and Management, Sichuan University of Arts and Science, Dazhou, China
3. School of Intelligent Finance, Tianfu College of Southwestern University of Finance and Economics, Chengdu, China
Email: i22022588@student.newinti.edu.my (Y.P.); f19920702@126.com (R.J.F.); 18904728778@163.com (G.T.Z.)
*Corresponding author

Manuscript received November 5, 2024; accepted May 2, 2025; published July 29, 2025.

Abstract—This paper empirically investigates the disposition effect anomalies in the A-share market using publicly available data on companies listed in the Chinese A-share market from January 2010 to January 2022 and finds a new empirical fact that, contrary to existing studies, capital gains are negatively correlated in cross-sectional stock expected returns, stocks with higher capital gains have lower expected returns and going long a portfolio of low capital gain stocks while going short a portfolio of high capital A long portfolio of low capital gain stocks and a short portfolio of high capital gain stocks can yield an average monthly excess return of 2.70%. Further research finds that investor overreaction and mispricing due to excessive attention to floating stocks are the sources of the disposition effect anomaly, with overreaction leading to a stronger negative effect of capital gains on expected returns for stocks with higher stock price overvaluation and higher investor attention. The research in this paper not only contributes to a better understanding of the disposition effect anomaly in the Chinese stock market but also has practical implications for improving market effectiveness and reducing the impact of the anomaly.

Keywords—capital gains, disposition effect, mispricing, overreaction, investor concerns

Cite: Yong Pan, Rujie Fan, and Gongtao Zhang, "Overreaction, Investor Anxiety, and Anomalies in the A-share Disposition Effect," Journal of Economics, Business and Management, vol. 13, no. 2, pp. 259-268, 2025.

Copyright © 2025 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

 

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