Quotation Andersen, Steffen, Hanspal, Tobin, Martinez-Correa, Jimmy, Meisner Nielsen, Kasper. 2020. Beliefs and Investment Behavior.


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Abstract

This study examines whether heterogeneous beliefs contribute to the incidence of the disposition effect. We show theoretically that optimistic investors are more likely to exhibit the disposition effect. We measure optimism using elicited beliefs from incentivized experiments and surveys and link these measures to investment decisions using administrative register data. We find that optimistic beliefs lead to both a higher allocation of wealth to risky assets and a higher incidence of the disposition effect. Individuals form optimistic beliefs from positive return experience consistent with reinforcement learning. We conclude that individuals’ beliefs help explain heterogeneity in behavioral biases in financial decisions.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Beliefs and Investment Behavior
Year 2020
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3516567
JEL G02, G11, D84, D81

Associations

People
Hanspal, Tobin (Details)
External
Andersen, Steffen (Copenhagen Business School, Denmark)
Martinez-Correa, Jimmy (Copenhagen Business School, Denmark)
Meisner Nielsen, Kasper (Copenhagen Business School, Denmark)
Organization
Institute for Finance, Banking and Insurance IN (Details)
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