What Drives Investors to Chase Returns?

We use data on one-participant retirement savings plans to identify a behavioral bias in decisions. Investors who earn top-decile returns increase contributions their accounts more than other investors. Using characteristics of the investors, accounts, and multivariate regression analysis, we first show that such ``return chasing'' behavior is robust controls for financial illiteracy, macroeconomic conditions, learning, transaction costs, housing prices, informational frictions. then structural two-asset model with tax-deferred taxable assets permanent expected produces investment responses younger or liquidity-constrained investors are consistent our data. Our results provide evidence investors' recent portfolio experiences have highly persistent effects expectations.