Tempus fugit: The impact of time constraint on investor behavior

This study experimentally examines the impact of time constraints on the disposition effect, which refers to the empirical fact that investors have a higher propensity to sell stocks with capital gains compared to stocks with capital losses. We recruit 270 student participants and implement three treatments: no time constraint (NTC), 20-s time constraint (20TC), and 10-s time constraint (10TC). We find that the 10TC treatment, where student participants perceive higher levels of time pressure than the NTC treatment, significantly reduces the disposition effect, whereas the 20TC treatment, in which feelings of time pressure do not differ from the NTC treatment, does not affect the disposition effect. Self-control is a potential explanation for the treatment effect. The replication experiment with 166 financial professionals not only indicates our results’ external validity but also shows the robustness of our results to the high time pressure (i.e., 5-s time constraint).