Behavioral Biases and Investment
نویسندگان
چکیده
We use a new and unique dataset to investigate the way investors react to prior gains/losses and the so called ”familiarity” bias. We distinguish between di¤erent behavioral theories (loss aversion, house-money e¤ect, mental accounting) and between behavioral and rational hypotheses (pure familiarity and informationbased familiarity). We show that, on an yearly horizon, investors react to previous gains/losses according to the house-money e¤ect. No evidence is found of narrow accounting as investors consider wealth in its entirety and risk taking in the ...nancial market is a¤ected by gains/losses in overall wealth, as well as ...nancial and real estate wealth. In terms of individual stock picking, we provide evidence in favor of the information-based theory and show that familiarity can be considered as a proxy for the availability of information as opposed to a behavioral heuristics. JEL classi...cation: G11, G14.
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