Journal of Financial Economics Vol. 172 2025
Stakes and investor behaviors
Abstract
We examine how stakes affect investor behaviors. In our unique setting, investors trade stocks in real accounts using their own money and simultaneously in a simulated setting. Our real-world within-investor estimation shows that investors exhibit stronger biases and perform worse in higher-stakes real accounts than in lower-stakes simulated accounts. Investors exhibit strong biases in both types of accounts, and the biases in both are strongly positively correlated. Such behavioral consistency suggests that low-stakes experiments are informative about real-world behaviors. Using additional account-level datasets, we demonstrate external validity by documenting a stronger (reverse) disposition effect on stocks (funds) with greater portfolio weights.
- DOI
- 10.1016/j.jfineco.2025.104146
- Volume
- 172
- Pages
- 104146
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex