Working Paper: NBER ID: w28730
Authors: Kazi Iqbal; Asadul Islam; John A. List; Vy Nguyen
Abstract: Whether, and to what extent, behavioral anomalies uncovered in the lab manifest themselves in the field remains of first order importance in finance and economics. We begin by examining behavior of retail traders/investors making investment decisions in constructed laboratory markets. Our results show that the behaviors of the traders are consistent with myopic loss aversion. We combine the lab results with a unique individual-level matched dataset on daily stock market transactions and portfolio positions over a two year period. We find that lab behaviors help to predict, but do not fully capture, the essential real-world trading analogs of retail traders.
Keywords: Myopic Loss Aversion; Investment Decisions; Behavioral Finance; Laboratory Experiments; Field Experiments
JEL Codes: C9; C93; D03; N97
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| investment behavior (G11) | earnings (J31) |
| myopic loss aversion (MLA) (G41) | portfolio size (G11) |
| myopic loss aversion (MLA) (G41) | trading frequency (G14) |
| feedback frequency (C83) | investment behavior (G11) |