History matters: How short-term price charts hurt investment performance

Charlotte Borsboom, Dirk-Jan Janssen, Markus Strucks and Stefan Zeisberger

Journal of Banking & Finance, 2022, vol. 134, issue C

Abstract: When making investment decisions, people rely heavily on price charts displaying the past performance of an asset. Price charts can come with any time frame, which the provider might strategically choose. We analyze the impact of the time frame on retail investors’ behavior, particularly trading activity and risk-taking, in a controlled experiment with 1041 retail investors. We find that shorter time frames are associated with more trading activity, resulting in higher transaction fees and investor welfare losses. However, the time frame does not affect average risk-taking.

Keywords: Behavioral finance; Experimental finance; Investor behavior; Price charts; Time frames; Risk-taking; Myopic loss aversion; Overtrading (search for similar items in EconPapers)
JEL-codes: D14 D18 G11 G41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:134:y:2022:i:c:s0378426621003022

DOI: 10.1016/j.jbankfin.2021.106351

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