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Taming the bias zoo

Author

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  • Liu, Hongqi
  • Peng, Cameron
  • Wei, Xiong
  • Wei, Xiong
Abstract
The success of behavioral economics has led to a new challenge: many biases offer observationally similar predictions for a targeted financial anomaly. To tame this bias zoo, we combine subjective survey responses with observational data to propose a new approach, one that is 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 trading motives, perceived information advantage and gambling preference dominate other motives, though they are not the most prevalent biases based on survey responses.

Suggested Citation

  • Liu, Hongqi & Peng, Cameron & Wei, Xiong & Wei, Xiong, 2022. "Taming the bias zoo," LSE Research Online Documents on Economics 109301, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:109301
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    References listed on IDEAS

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    More about this item

    Keywords

    bias zoo; excessive trading; gambling preference; perceived information advantage;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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