Persistence of Beliefs in an Investment Experiment

34 Pages Posted: 4 Feb 2008 Last revised: 19 Jun 2008

See all articles by K. Jeremy Ko

K. Jeremy Ko


Oliver Hansch

Pennsylvania State University

Multiple version iconThere are 3 versions of this paper

Date Written: June 19, 2008


A number of behavioral finance theories posit that investors adhere to their existing beliefs in spite of new information. This paper reports the results of an investment experiment which shows that subjects' inferences are biased by their prior beliefs in a manner that depends on investment outcomes. Specifically, their perception of new information was more positively biased for their prior favored assets when incurring losses than gains. This asymmetric bias may help explain empirical patterns such as loser momentum and suggests modifications to models of belief persistence in markets.

Keywords: Experimental finance; Behavioral finance, Information processing, Confirmatory Bias, Momentum

JEL Classification: D89, G19

Suggested Citation

Ko, Kwangmin and Hansch, Oliver, Persistence of Beliefs in an Investment Experiment (June 19, 2008). EFA 2008 Athens Meetings Paper, Available at SSRN: or

Kwangmin Ko

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Oliver Hansch (Contact Author)

Pennsylvania State University ( email )

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