Primacy in Stock Market Participation:The Effect of Initial Returns on Market Re-Entry Decisions

Arikan, Ozlem, Gozluklu, Arie, Kim, Gi and Sakaguchi, Hiroaki (2018). Primacy in Stock Market Participation:The Effect of Initial Returns on Market Re-Entry Decisions. European Journal of Finance ,

Abstract

We examine whether initial returns influence investors’ decisions to return to the stock market following withdrawal. Using a survival analysis technique to estimate Finnish retail investors’ likelihood of stock market re-entry reveals that investors who experience lower initial returns are less likely to return, even after controlling for returns in the last month and average monthly returns for the duration of investing. This primacy effect is robust to accounting for endogeneity in investors’ exit decisions, and other behavioural biases such as recency and saliency of investment experience. Individual investors appear to be subject to primacy bias and tend to put a significant weight on initial experiences in re-entry decisions.

Publication DOI: https://doi.org/10.1080/1351847X.2018.1459764
Divisions: Aston Business School
Aston Business School > Accounting Research Group
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis Group in The European Journal of Finance on 10 April 2018, available online at: http://www.tandfonline.com/10.1080/1351847X.2018.1459764
Uncontrolled Keywords: Individual Investor Behavior, Stock Market Participation, Experiential Learning, Primacy Effect, Stock Market Re-entry Decision
Full Text Link:
Related URLs: https://www.tan ... 7X.2018.1459764 (Publisher URL)
Published Online Date: 2018-04-11
Authors: Arikan, Ozlem
Gozluklu, Arie
Kim, Gi
Sakaguchi, Hiroaki

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Access Restriction: Restricted to Repository staff only until 10 October 2019.


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