Payment methods and the disposition effect: Evidence from Indonesian mutual fund trading

This paper investigates the link between payment methods used by investors in mutual funds and the tendency with which investors realize gains earlier than losses - the disposition effect. We utilize a proprietary dataset detailing investor trading accounts in Indonesian mutual funds, whom are permitted to buy and sell securities in exchange for cash or other assets. These two payment methods are economically equivalent in value and cost; however, differ in payment saliency. We find that more salient payment methods are associated with a higher disposition effect and vice versa, less salient payments are associated with a smaller tendency to realize gains more readily than losses. (C) 2021 Elsevier B.V. All rights reserved.