Recent experimental studies have illustrated the influence of price-path, particularly the ‘non-straight’ price-path on several aspects of investor behaviour. The paper computes a proxy for price-path based on Cumulative Prospect Theory and with investor-level highfrequency trade data from the commodities futures market, demonstrates that the nature of the price-path significantly impacts the degree of disposition bias, after controlling for the level of returns and volatility of the commodity. We find that the experience of a favorable (unfavorable) price-path, decreases (increases) disposition bias among both long and short traders with Cumulative Prospect Theory preferences. Experience of a ‘favourable’ price path leads to a decline (increase) in the propensity for gain realization. However, its impact on the propensity of loss realization remains nonexistent. We conjecture that both investor preferences and beliefs about future price movement, inferred from the price-path experienced, influence their trading decisions.​

Key words: Price Path, Investor Behaviour, Behavioural Finance, Disposition Bias, Futures, Commodities
JEL classifications: G110, G130, G410​