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The Effect of Prior Choices on Expectations and Subsequent Portfolio Decisions / Camelia M. Kuhnen, Sarah Rudorf, Bernd Weber.
- Format:
- Book
- Author/Creator:
- Kuhnen, Camelia M.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w23438.
- NBER working paper series no. w23438
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- We document that prior portfolio choices influence investors' expectations about asset values, and their future choices. We find that people update more from information consistent with their prior choices, leading to sticky portfolios over time. These effects are related to how the brain's valuation centers encode new information about assets and about the trader's own success. These findings provide microfoundations for theoretical models where agents learn jointly about their skill and about asset values, leading to disagreement, and offer a common explanation for several puzzling investor behaviors, specifically, households' low stock market participation rate, and the disposition and repurchase effects.
- Notes:
- Print version record
- May 2017.
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