Investor Memory

62 Pages Posted: 15 Mar 2019 Last revised: 11 Nov 2021

See all articles by Katrin Gödker

Katrin Gödker

Maastricht University - School of Business and Economics

Peiran Jiao

Maastricht University - Department of Finance

Paul Smeets

Maastricht University

Date Written: November 1, 2021


How does memory shape individuals' financial decisions? We find experimental evidence of a self-serving memory bias. Individuals over-remember positive investment outcomes of their chosen investments and under-remember negative ones. In contrast, individuals who did not choose their investments or did not invest but merely observed outcomes do not have this bias. The memory bias affects individual beliefs and decisions to re-invest. After investing, subjects form overly optimistic beliefs about their investment and re-invest even when doing so leads to a lower expected return. Our findings contribute to the understanding of how people learn from experiences in financial markets. More generally, the documented memory bias proposes a consistent explanation for stylized facts about investor behavior as well as dynamic risk taking in many economic domains.

Keywords: Memory, Selective Recall, Beliefs, Motivated Reasoning, Investor Behavior, Experimental Economics

JEL Classification: D01, G4

Suggested Citation

Gödker, Katrin and Jiao, Peiran and Smeets, Paul, Investor Memory (November 1, 2021). Available at SSRN: or

Katrin Gödker (Contact Author)

Maastricht University - School of Business and Economics ( email )


Peiran Jiao

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD

Paul Smeets

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
+31433883643 (Phone)

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