The Effect of Prior Choices on Expectations and Subsequent Portfolio Decisions / Camelia M. Kuhnen, Sarah Rudorf, Bernd Weber.

By:

Kuhnen, Camelia M

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w23438.Publication details: Cambridge, Mass. National Bureau of Economic Research 2017.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: 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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w23438 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

May 2017.

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.