The disposition effect
Selling winners quickly and holding losers, which most people do without knowing it.
In the demo portfolio
1493 vs 994 days
How it is computed here
The average days held on positions closed in profit, against the average on those closed at a loss.
Worked example
- Losers were held 1493 days on average; winners 994.
- Holding losers longer than winners is the disposition effect: selling what went up, keeping what went down.
Demo portfolio: four invented companies, generated prices, measured by the real engine. Past returns do not predict future ones.
Where it misleads
A gap here is a well-documented bias (Shefrin and Statman, 1985), not a verdict on any single decision — there are good reasons to cut a winner. It is worth knowing because almost nobody is ever shown it about themselves.