Abstract:
The findings are important for individual stock investors and potential investors
significantly; can be attentive to their peculiar cognitive and emotive factors in their
accurate investment decisions. Among the 306 individual investors in the Colombo Stock
Exchange (CSE) was used as survey model. Through standardized questionnaires from
earlier research studies, the events, beliefs, behavioral consequences, loss aversion,
disposition, and investor sentiment assessed. AMOS software was used for the structural
equation modelling (SEM) analysis of the data. The empirical data supported that loss
aversion and investor sentiment positively impacted the disposition bias of individual
investors. The events, beliefs and behavioral consequences (emotions) do not
considerably drive factors of disposition bias in the Sri Lankan stock market. The results
showed that loss aversion and sentiment are the primary causes of disposition bias,
which is supported by the previous scholar's findings. The study supported loss aversion
through disposition bias and the mediational impact of events. The main theoretical
contribution is; the ABC model does not fully support in the Sri Lanka context to address
the disposition where the loss aversion contributes to the execution of the disposition and
moderating by investor sentiment. The existing outcomes will be useful for the investors,
prospective investors and the stockbroker firms for maintaining and leading to
substantial assertive decision making reducing of having biased decisions. The study
identified the biases of a person's personality about nature in the early structure before
leading to disposition bias. The second half of 2020 was used for which statistics were
collected, and only the Sri Lankan market was included in the generalization. The
macroeconomic implications and the institutional investors do not consider for the study
due to complexity. The association between loss aversion and disposition bias was proved
via the investigation. The paper recommended that investors with risk-averse prime for
the disposition and the disposition is heavily influenced by a person's loss-averse
personality, which is controlled by investor sentiment.
