Persistence of Beliefs in an Investment Experiment

36 Pages Posted: 17 Mar 2009

See all articles by K. Jeremy Ko

K. Jeremy Ko

Upstart

Oliver Hansch

Pennsylvania State University

Multiple version iconThere are 3 versions of this paper

Date Written: January 22, 2009

Abstract

A number of behavioral finance theories posit that investors adhere to prior 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 (January 22, 2009). Available at SSRN: https://ssrn.com/abstract=1360238 or http://dx.doi.org/10.2139/ssrn.1360238

Kwangmin Ko (Contact Author)

Upstart ( email )

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San Mateo, CA 94403
United States
2022570741 (Phone)

Oliver Hansch

Pennsylvania State University ( email )

609C Business Administration Building
University Park, PA 16802
United States

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