Taming the Bias Zoo
The success of the behavioral economics literature has led to a new challenge—a large number of behavioral biases offering observationally similar predictions for a targeted anomaly in financial markets. To tame the bias zoo, we propose a new approach of combining subjective survey responses with observational data; this approach has the advantage of being robust to question-specific biases introduced through surveys. We illustrate this approach by administering a nationwide survey of Chinese retail investors to elicit their trading motives. In cross-sectional regressions of respondents’ actual turnover on survey-based measures of trading motives, perceived information advantage and gambling preference dominate other motives, even though they are not the most prevalent biases simply based on survey responses.
Published Versions
Hongqi Liu & Cameron Peng & Wei A. Xiong & Wei Xiong, 2021. "Taming the bias zoo," Journal of Financial Economics, .
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