This paper examines the effect of prior investment experience in specific industries on subsequent investment decisions. Using households’ trading records from a large discount broker between 1991 and 1996, I find that prior success in a given industry increases the likelihood of subsequent purchases in the same industry. The effect is stronger for more recent experiences and for less sophisticated or diversified investors, and it is not wealth enhancing. The results suggest investors categorize industries at a highly resolved level, finer than the Fama–French ten-industry classification. Similar effects are also apparent for size- and value-based categories but at smaller magnitudes.

Using novel data from a crowdsourcing platform for ranking stocks, we investigate how investors form expectations about stock returns over the next week. We find that investors extrapolate from stocks’ recent past returns, with more weight on more recent returns, especially when recent returns are negative, salient, or from a dispersed cross-section. Such extrapolative beliefs are stronger among nonprofessionals and large stocks. Moreover, consensus rankings negatively predict returns over the next week, more so among stocks with low institutional ownership and a high degree of extrapolation. A trading strategy that sorts stocks on investor beliefs generates an economically significant profit.

We examine the role of first impressions in angel investor decision-making. Video stills of entrepreneurs pitching on the Shark Tank show and in Startup Battlefield competitions yield six measures of first impressions of entrepreneurs’ facial traits and two principal components: one that captures general ability and the other that contrasts charm and managerial ability. We find positive associations between both components and the likelihood of entrepreneurs receiving an investment offer or winning a competition round. Post-event business outcome analyses reveal that investors internalize entrepreneurs’ general ability rationally but exhibit irrational tendencies when internalizing entrepreneurs’ charm and managerial ability. Investment experience mitigates investors’ irrational use of charm and managerial ability cues.