IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/33226.html
   My bibliography  Save this paper

Investor Memory and Biased Beliefs: Evidence from the Field

Author

Listed:
  • Zhengyang Jiang
  • Hongqi Liu
  • Cameron Peng
  • Hongjun Yan

Abstract

We survey a large, representative sample of retail investors in China to elicit their memories of stock market investments and their return expectations. We merge this survey data with administrative transaction data to test a model in which investors selectively recall past experiences to form their beliefs. Our analysis uncovers new facts about investor memory and highlights similarity-based recall as a novel mechanism of belief formation in financial markets. A rising market prompts investors to recall their past experiences more positively, leading to more optimistic forecasts of future returns. Recalled experiences explain a sizable fraction of cross-investor variation in return expectations and dominate actual experiences in their explanatory power. In the transaction data, we confirm that recalled experiences affect investors' trading decisions through a belief channel.

Suggested Citation

  • Zhengyang Jiang & Hongqi Liu & Cameron Peng & Hongjun Yan, 2024. "Investor Memory and Biased Beliefs: Evidence from the Field," NBER Working Papers 33226, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:33226
    Note: AP
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w33226.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:33226. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.