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Is Buying more Forward-Looking than Selling? The Role of Beliefs in Investment Decisions

Year: 2018

Type: article

Abstract: We provide evidence that people do not consistently incorporate their beliefs into investment decisions. Our experimental findings indicate that selling is considerably less belief-driven than buying. This difference stems from selling decisions in the presence of paper losses for which we observe that the belief sensitivity is reduced by half. Selling decisions for paper gains, however, are as sensitive to beliefs as buying decisions. The lower belief sensitivity for selling decisions holds also in settings where investors’ accounts are neutralized in each period, albeit with a lower magnitude. While buying decisions increase investors’ wealth we find selling decisions to have a negative effect.

Source: Zurich Open Repository and Archive (University of Zurich)

Authors: Daniel Grosshans, Ferdinand Langnickel, Stefan Zeisberger

Institutions: University of Zurich, Radboud University Nijmegen

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2619710176

FWCI: 0.385

Cites:

Cited by: 3

Related to: 10