The Effects of Experience on Investor Behavior: Evidence from India's IPO Lotteries

Ramadorai, Tarun, Balasubramaniam, Vimal and Anagol, Santosh (2015) The Effects of Experience on Investor Behavior: Evidence from India's IPO Lotteries. Working Paper.

Abstract

We exploit the randomized allocation of stocks in 57 Indian IPO lotteries to 1.7 million investors between 2007 and 2012 to provide new estimates of the causal effect of investment experiences on future investment behavior. We find that investors experiencing exogenous gains in IPO stocks (the treatment) are more likely to apply for future IPOs, increase trading in their portfolios, exhibit a stronger disposition effect, and tilt their portfolios towards the sector of the treatment IPO. Treatment effects are stronger for smaller accounts, and inherit the sign of the IPO first-day return.

Item Type: Other Working Paper
Keywords: investor behavior, trading, disposition effect, diversification, familiarity, lotteries, causal inference, India, finance
Subject(s): Finance
Centre: Faculty of Finance
Date Deposited: 07 Jul 2015 08:22
Last Modified: 23 Oct 2015 14:08
Funders: not applicable
URI: http://eureka.sbs.ox.ac.uk/id/eprint/5370

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