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A Retrieved-Context Theory of Financial Decisions*
Resource type
Authors/contributors
- Wachter, Jessica A (Author)
- Kahana, Michael Jacob (Author)
Title
A Retrieved-Context Theory of Financial Decisions*
Abstract
Studies of human memory indicate that features of an event evoke memories of prior associated contextual states, which in turn become associated with the current event’s features. This retrieved-context mechanism allows the remote past to influence the present, even as agents gradually update their beliefs about their environment. We apply a version of retrieved-context theory, drawn from the literature on human memory, to explain three types of evidence in the financial economics literature: the role of early life experience in shaping investment choices, occurrence of financial crises, and the effect of fear on asset allocation. These applications suggest a recasting of neoclassical rational expectations in terms of beliefs as governed by principles of human memory.
Publication
The Quarterly Journal of Economics
Volume
139
Issue
2
Pages
1095-1147
Date
2024-05-01
Journal Abbr
The Quarterly Journal of Economics
ISSN
0033-5533
Accessed
6/28/24, 1:03 PM
Library Catalog
Silverchair
Citation
Wachter, J. A., & Kahana, M. J. (2024). A Retrieved-Context Theory of Financial Decisions*. The Quarterly Journal of Economics, 139, 1095–1147.
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