Projection bias by investors: A market approach

Doron Kliger and Ori Levy

Journal of Economic Behavior & Organization, 2008, vol. 66, issue 3-4, 657-668

Abstract: Decision makers often fail to forecast their future feeling, erroneously projecting current preferences onto future preferences, an attribute recently labeled "projection bias" [Loewenstein, G., O'Donoghue, T., Rabin, M., 2003. Projection bias in predicting future utility. Quarterly Journal of Economics 118, 1209-1248]. There is sweeping psychological evidence for the existence of projection bias. Still, a scrutiny of projection bias based on real (rather than experimental) data is lacking. This paper devises and implements such a framework. Using US asset market data, our statistical findings unequivocally support the existence of projection bias in investors' decision-making processes.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:66:y:2008:i:3-4:p:657-668

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