Taming the Bias Zoo

53 Pages Posted: 15 Apr 2020 Last revised: 15 May 2021

See all articles by Hongqi Liu

Hongqi Liu

Chinese University of Hong Kong, Shenzhen

Cameron Peng

London School of Economics & Political Science (LSE) - Department of Finance

Wei A. Xiong

Shenzhen Stock Exchange

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 22, 2020

Abstract

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

Liu, Hongqi and Peng, Cameron and Xiong, Wei A. and Xiong, Wei, Taming the Bias Zoo (March 22, 2020). Available at SSRN: https://ssrn.com/abstract=3558848 or http://dx.doi.org/10.2139/ssrn.3558848

Hongqi Liu

Chinese University of Hong Kong, Shenzhen ( email )

Cameron Peng (Contact Author)

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom

Wei A. Xiong

Shenzhen Stock Exchange ( email )

2012 Shennan Blvd., Futian District
Shenzhen
China

Wei Xiong

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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