Unlearning investment biases

Moritz Mosenhauer

Journal of Behavioral Finance, 2025, vol. 26, issue 1, 1-19

Abstract: This study considers two causes—inexperience and overreaction to price movements—of a well-established phenomenon on the stock market called “excessive trading”: large trading volumes leading to decreased net portfolio returns via increased transaction costs. Creating a stylized hold or trade-scenario in a computer laboratory experiment, I confirm both inexperience and overreaction as robust drivers of trading activity. The 2 × 2 experimental design featuring overlapping treatments enables me to disentangle the two direct effects from their interaction. The results show no signs of dependencies between the two channels, suggesting that psychological distortions are immutable personal characteristics that cannot be unlearned.

Date: 2025
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DOI: 10.1080/15427560.2023.2225241

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