Abstract
Many investors rely on price paths to form beliefs about investment alternatives. In a controlled laboratory experiment we strip paths of potential relevant information by providing subjects with full information via a different channel. Our experiment is based on a simple static investment task. The results indicate that subjects are still influenced by informationally irrelevant paths and that this behavior cannot be simply attributed to a belief that patterns from the past will be resembled in the future. We extend a recently proposed model based on a CPT evaluation of price paths' implicit return distributions to accommodate our findings. Additionally, we identify reference point, loss aversion, trend, and spread as important path characteristics that determine how a path is evaluated. In a linear regression model we find support for the different impact of these asset characteristics for historical and simulated future price paths.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
