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How Persistent are the Effects of Experience Sampling on Investor Behavior?

Author

Listed:
  • Meike Bradbury

    (University of Zurich)

  • Thorsten Hens

    (University of Zurich, Norwegian School of Economics and Business Administration (NHH), and Swiss Finance Institute)

  • Stefan Zeisberger

    (Radboud University and University of Zurich)

Abstract

Investor behavior is considerably different when the risk-return tradeoff is presented by experience sampling as opposed to a descriptive communication. We analyze the persistency of this difference in a setting in which investors are faced with multiple decisions over time and are consequently able to adjust the risk level they initially chose. For this we use an experimental setting with repeated investment decisions over multiple trading days, and we introduce a new form of risk simulation in which wealth paths over time are presented rather than just final outcomes. After investors’ initial decision, for which we confirm previous findings, we do not find persistent differences of simulation-based learning on investors’ risk-taking behavior. With regards to trading volume, only a simulation in which investors see wealth paths and not only final outcomes leads to slightly lower trading frequency soon after the initial asset allocation. Risk simulations seem to change short-term risk perception but not investor behavior in extended time periods.

Suggested Citation

  • Meike Bradbury & Thorsten Hens & Stefan Zeisberger, 2017. "How Persistent are the Effects of Experience Sampling on Investor Behavior?," Swiss Finance Institute Research Paper Series 17-43, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1743
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    More about this item

    Keywords

    Behavioral finance; simulated experience; experience sampling; investment decision; risk communication; financial advice;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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