The paper examines the tendency to sell winners and hold on to losers in a dynamic noisy rational expectations equilibrium with informed and uninformed investors. The key feature of the model is that the information asymmetry between investors varies over time. Besides demonstrating that the disposition effect is not intrinsically at odds with rational behavior, the model makes two novel predictions. First, disposition effects among uninformed investors should weaken after events that reduce information asymmetry. Second, disposition effects among uninformed investors should be weaker in persistent winners and persistent losers. The data, transactions of 30,000 clients at a German broker between 1995 and 2000, are consistent with these predictions.