How Persistent are the Effects of Experience Sampling on Investor Behavior?

51 Pages Posted: 9 May 2015 Last revised: 18 May 2018

Meike Bradbury

University of Zurich - Department of Banking and Finance

Thorsten Hens

University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute (Zurich Center)

Stefan Zeisberger

Radboud University; University of Zurich

Date Written: May 15, 2018

Abstract

Investor behavior is considerably different when the risk-return tradeoff is presented by experience sampling as opposed to a descriptive communication. We analyze the persistency of this difference in a setting in which investors are faced with multiple decisions over time and are consequently able to adjust the risk level they initially chose. For this we use an experimental setting with repeated investment decisions over multiple trading days, and we introduce a new form of risk simulation in which wealth paths over time are presented rather than just final outcomes. After investors’ initial decision, for which we confirm previous findings, we do not find persistent differences of simulation-based learning on investors’ risk-taking behavior. With regards to trading volume, only a simulation in which investors see wealth paths and not only final outcomes leads to slightly lower trading frequency soon after the initial asset allocation. Risk simulations seem to change short-term risk perception but not investor behavior in extended time periods.

Keywords: Behavioral finance, simulated experience, experience sampling, investment decision, risk communication, financial advice

JEL Classification: D81; G11

Suggested Citation

Bradbury, Meike and Hens, Thorsten and Zeisberger, Stefan, How Persistent are the Effects of Experience Sampling on Investor Behavior? (May 15, 2018). Swiss Finance Institute Research Paper No. 17-43. Available at SSRN: https://ssrn.com/abstract=2603780 or http://dx.doi.org/10.2139/ssrn.2603780

Meike Bradbury

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Thorsten Hens

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 32
Zurich, 8032
Switzerland
+41-44 634 37 06 (Phone)

Norwegian School of Economics and Business Administration (NHH)

Helleveien 30
Bergen, 5045
Norway

Swiss Finance Institute (Zurich Center)

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Stefan Zeisberger (Contact Author)

Radboud University ( email )

Nijmegen
Netherlands

University of Zurich ( email )

Zürich
Switzerland

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