Taming the Bias Zoo
53 Pages Posted: 15 Apr 2020 Last revised: 15 May 2021
Date Written: March 22, 2020
The success of behavioral economics has led to a new challenge—many biases offering observationally similar predictions for a targeted financial anomaly. To tame this bias zoo, we combine subjective survey responses with observational data to propose a new approach, one that is robust to question-specific biases introduced through surveys. We illustrate this approach by administering a nationwide survey of Chinese retail investors to elicit their trading motives. In cross-sectional regressions of respondents’ actual turnover on survey-based trading motives, perceived information advantage and gambling preference dominate other motives, even though they are not the most prevalent biases simply based on survey responses.
Keywords: excessive trading, survey, gambling preference, overconfidence
JEL Classification: G02, G11
Suggested Citation: Suggested Citation