An exploratory experimental analysis of path-dependent investment behaviors

Publication date: August 2018Source: Journal of Economic Psychology, Volume 67Author(s): Richard Deaves, Brian Kluger, Jennifer MieleAbstractIn an experimental setting designed to cleanly partition the disposition effect and various wealth effects, we find evidence that such path-dependent behaviors are related in the sense that those subject to one effect are more or less likely to exhibit another. For example, those subject to the disposition effect are more likely to be subject to the break-even effect. A prospect-theory utility function dominated by curvature rather than loss aversion could account for this finding. There are also significant gender differences in path-dependent behaviors. Notably, males are more likely to make portfolio adjustments in response to changes in relative prices.

Source: Journal of Economic Psychology - July 10, 2018 Category: Psychiatry & Psychology Source Type: research