Stakes and Investor Behaviors

Prof. Baolian WANG, Associate Professor of Finance, University of Florida

Date:         1 March 2023 (Wednesday)
Time:        9:30am – 10:30am
Venue:      Online via Zoom
Host:         Prof. Hung Wan KOT, Assistant Professor in Finance
Zoom Link: https://umac.zoom.us/j/98654471597


We examine how stakes affect investor behaviors. In our unique setting, the same investors trade stocks in their real accounts using their own money and, at the same time, trade in a simulated setting. Our real-world within-investor estimation produces strong evidence that investors exhibit stronger biases and perform worse in their higher-stakes real accounts than in their lower-stakes simulated accounts. Even with no monetary stakes, investors exhibit strong biases in their simulated accounts, and biases in the two types of accounts are strongly positively correlated. Such behavioral consistency suggests that low-stakes experimental methods, although imperfect, can be informative about real-world human behaviors. Using account data from two brokerage companies, we find that investors exhibit a stronger disposition effect on positions with greater portfolio weight. Hence, the finding that stakes-strengthening-biases may not be unique to the comparison between no-monetary and high-monetary stakes.


Prof. Baolian WANG is the Associate Professor of Finance (with tenure) and Bank of America Professor in University of Florida. He obtained his PhD from the Hong Kong University of Science and Technology. His research investigates empirical asset pricing, investor behavior and the Chinese economy. His papers have been published or accepted in leading academic journals including Journal of Finance, Review of Financial Studies, Journal of Financial Economics, Management Science, Review of Finance, Strategic Management Journal and so on. His research papers have been accepted for presentation at a number of highly regarded international conferences and won Best Paper Awards from China International Forum on Finance and Policy in 2019.


All are welcome!