Asymmetric Learning from Financial Information

Abstract:     
This study asks whether investors learn differently from gains versus losses, whether learning is better or worse when people are actively investing in a security or passively observing its payoffs, and whether there are personal characteristics that drive learning performance. Experimental evidence shows that the ability to learn from financial information is worse in the loss domain, especially if investors have personally experienced the prior outcomes of the assets considered. Heterogeneity in learning errors across investors is particularly high following negative outcomes. Learning performance is determined by financial literacy and by a genetic factor related to memory and emotion control.

Number of Pages in PDF File: 36

Keywords: financial decision making, learning, gains, losses, genes, COMT, neuroeconomics

JEL Classification: G11, D83, C91

working papers series