124 Pages Posted: 13 Dec 2015 Last revised: 29 Oct 2016
Date Written: October 4, 2016
Winners of randomly assigned initial public offering (IPO) lottery shares are significantly more likely to hold these shares than lottery losers 1, 6, and even 24 months after the random allocation. This finding persists in samples of highly active investors, suggesting along with additional evidence that this “endowment effect” is not driven by inertia alone. The effect decreases as experience in the IPO market increases, but remains even for very experienced investors. These results provide field evidence derived from the behavior of 1.5 million Indian stock investors consistent with the laboratory literature that documents endowment effects for risky gambles.
Keywords: endowment effect, exchange asymmetry, reference dependence, loss aversion, salience, inattention, lotteries, causal inference, India
JEL Classification: G11, G14, C93, D12
Suggested Citation: Suggested Citation
Anagol, Santosh and Balasubramaniam, Vimal and Ramadorai, Tarun, Endowment Effects in the Field: Evidence from India's IPO Lotteries (October 4, 2016). Available at SSRN: https://ssrn.com/abstract=2702555 or http://dx.doi.org/10.2139/ssrn.2702555