Investor Memory

76 Pages Posted: 15 Mar 2019 Last revised: 13 Mar 2024

See all articles by Katrin Gödker

Katrin Gödker

Bocconi Univesity

Peiran Jiao

Maastricht University - Department of Finance

Paul Smeets

University of Amsterdam

Date Written: November 1, 2021


We provide experimental evidence of a positive memory bias which affects individuals' beliefs, decisions to reinvest, and overconfidence in the stock market. Individuals over-remember positive investment outcomes of chosen assets and under-remember negative ones. Based on their memories, subjects form overly optimistic beliefs about their investment, reinvest too much, and become overconfident about their investment ability relative to others. We further provide evidence on motivation driving the memory bias. This positive memory bias offers a cognitive microfoundation for why gains weight more than losses when people learn from experiences. This helps reconciling various stylized facts in investor beliefs and behavior.

Keywords: Selective Memory, Beliefs, Motivated Reasoning, Investor Behavior, Experimental Finance

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)

Bocconi Univesity ( email )

Via Roentgen 1
Milano, MI 20136

Peiran Jiao

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD

Paul Smeets

University of Amsterdam ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV

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