Witnessing stock-market history in the making creates a vivid story, but does not provide valuable information for forming return expectations. However, using a unique dataset about the timing of professionals' career start in the finance industry, we show that finance professionals extrapolate from personally witnessed returns. This result is robust when controlling for all publicly available information and other time-fixed effects as well as interpersonal differences. We find that returns witnessed early in the career are more formative than those witnessed recently. Among the potential channels through which witnessed returns might affect expected returns, a judgmental bias appears most plausible.

Project duration

01.09.2016 - 31.03.2017


Project members

Prof. Dr. Arvid Hoffmann
Dr. Zwetelina Iliewa
Ass.-Prof. Lena Jaroszek