Trend-Chasing

Wai Mun Fong
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Wai Mun Fong: National University of Singapore

Chapter 3 in The Lottery Mindset: Investors, Gambling and the Stock Market, 2014, pp 46-76 from Palgrave Macmillan

Abstract: Abstract The human brain is hard-wired to look for patterns even in randomness. A common bias in investing is the extrapolation bias or the tendency to buy assets that have high past returns and sell assets that have low past returns. Trend-chasing is particularly common among individual and inexperienced investors. This chapter analyzes the psychological biases that precipitate trend-chasing, surveys the research evidence on trend-chasing from psychology, economics, and finance, and examines the short-and longterm consequences of this form of behavior.

Keywords: pattern-seeking; representativeness heuristic; trend-chasing (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-38173-6_3

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DOI: 10.1057/9781137381736_3

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