Persistence of Beliefs in an Investment Experiment

36 Pages Posted: 17 Mar 2010

See all articles by K. Jeremy Ko

K. Jeremy Ko

Upstart

Zhijian (James) Huang

Rochester Institute of Technology (RIT) - Department of Accounting and Finance

Multiple version iconThere are 3 versions of this paper

Date Written: February 15, 2010

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 Huang, Zhijian, Persistence of Beliefs in an Investment Experiment (February 15, 2010). Available at SSRN: https://ssrn.com/abstract=1571689 or http://dx.doi.org/10.2139/ssrn.1571689

Kwangmin Ko

Upstart ( email )

2950 S Delaware St #300
San Mateo, CA 94403
United States
2022570741 (Phone)

Zhijian Huang (Contact Author)

Rochester Institute of Technology (RIT) - Department of Accounting and Finance ( email )

College of Business
105 Lomb Memorial Drive
Rochester, NY 14623-5608
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
59
Abstract Views
1,163
rank
86,916
PlumX Metrics