SpeakerPaul Smeets (Maastricht University)
LocationUvA Roeterseiland, room E1.51
Date and time
October 26, 2021
16:00 - 17:15
Abstract: How does memory shape individuals’ financial decisions? We find experimental evidence of a self-serving memory bias. Individuals over-remember positive investment outcomes of their chosen investments and under-remember negative ones. In contrast, individuals who did not choose their investments or did not invest but merely observed outcomes do not have this bias. The memory bias affects individual beliefs and decisions to re-invest. After investing, subjects form overly optimistic beliefs about their investment and re-invest even when doing so leads to a lower expected return. Our findings contribute to the understanding of how people learn from experiences in financial markets. More generally, the documented memory bias proposes a consistent explanation for stylized facts about investor behavior as well as dynamic risk taking in many economic domains. Joint with Katrin Gödker and Peiran Jiao.