| |
|
|
|
Investor Memory and Biased Beliefs: Evidence from the Field
|
|
|
| |
|
Bonn Applied Microeconomics Seminar |
Place: IZA, Schaumburg-Lippe-Straße 9, Conference Room (2:15 p.m.) |
Date: 09.04.2024, 14:15 - 15:30 |
| |
|
|
|
| |
|
Abstract: |
We survey a large representative sample of retail investors in China to elicit their memories
of stock market investment and return expectations. We merge the survey data with
administrative data of transactions to test a model in which investors selectively recall past
experiences similar to the present cue to form beliefs. Our analysis uncovers new facts about
investor memory and supports similarity-based recall as a key mechanism of belief formation
in financial markets. When the market is going up, it cues investors to retrieve episodes
of rising markets and recall their past performance more positively. Recalled experiences
explain a sizable fraction of cross-investor variation in beliefs and dominate actual experiences
in explanatory power. Recalled experiences also drive out the explanatory power of
recent returns for expected future returns, ruling in a memory-based foundation for return
extrapolation. |
| |
|
| |
|
|
For more information, please contact seminar@iza.org
|
