Experience Effects on Wall Street vs. Main Street: Field and Lab Evidence of Context Dependence

Benjamin Christoffersen (), Arvid Hoffmann (), Zwetelina Iliewa () and Lena Jaroszek ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We examine how and why context influences experiential learning, comparing professional and private-context stock market experiences. We find opposing patterns: In professional contexts, experiential learning exhibits a primacy bias, where sticky early experiences cause an underreaction to subsequent experiences. In contrast, in private contexts, a recency bias causes beliefs to fluctuate excessively over time. To identify the causal effect of context, we leverage (i) panel data on the dynamics of context-related experiences and expectations of finance professionals and (ii) experimental data on investment choices. Our experimental design allows us to identify the cognitive mechanisms underlying the documented context dependence of experience effects.

Keywords: experience effects; finance professionals; reinforcement learning; salience; attention (search for similar items in EconPapers)
JEL-codes: D83 D84 G02 G17 (search for similar items in EconPapers)
Pages: 67
Date: 2025-04
New Economics Papers: this item is included in nep-exp and nep-mac
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