Abstract
We exploit the randomized allocation of stocks in 57 Indian IPO lotteries to 1.7 million investors between 2007 and 2012 to provide new estimates of the causal effect of investment experiences on future investment behavior. We find that investors experiencing exogenous gains in IPO stocks (the treatment) are more likely to apply for future IPOs, increase trading in their portfolios, exhibit a stronger disposition effect, and tilt their portfolios towards the sector of the treatment IPO. Treatment effects are stronger for smaller accounts, and inherit the sign of the IPO first-day return.
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