Wall Street Crosses Memory Lane: How Witnessed Returns Affect Professionals' Expected Returns

Arvid O. I. Hoffmann, Zwetelina Iliewa, Lena Jaroszek

Research output: Working paperResearch

Abstract

Witnessing stock-market history in the making creates a vivid story, but does not provide valuable information. However, finance professionals extrapolate from personally witnessed returns, which we show by using a unique dataset about the timing of their career start in the finance industry. This result is robust when controlling for all publicly available information and other time-fixed effects as well as interpersonal differences. Additionally, we find that returns witnessed early in the career are more formative than those witnessed recently. Finally, among the potential channels through which witnessed returns might affect expected returns, a judgmental bias appears most plausible.
Original languageEnglish
Place of Publicationwww
PublisherSSRN: Social Science Research Network
Number of pages51
Publication statusPublished - 2016

Keywords

  • Finance professionals
  • Expected returns
  • Non-informative observations
  • Early career experiences

Cite this

Hoffmann, A. O. I., Iliewa, Z., & Jaroszek, L. (2016). Wall Street Crosses Memory Lane: How Witnessed Returns Affect Professionals' Expected Returns. www: SSRN: Social Science Research Network.
Hoffmann, Arvid O. I. ; Iliewa, Zwetelina ; Jaroszek, Lena. / Wall Street Crosses Memory Lane : How Witnessed Returns Affect Professionals' Expected Returns. www : SSRN: Social Science Research Network, 2016.
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Hoffmann, AOI, Iliewa, Z & Jaroszek, L 2016 'Wall Street Crosses Memory Lane: How Witnessed Returns Affect Professionals' Expected Returns' SSRN: Social Science Research Network, www.

Wall Street Crosses Memory Lane : How Witnessed Returns Affect Professionals' Expected Returns. / Hoffmann, Arvid O. I.; Iliewa, Zwetelina; Jaroszek, Lena.

www : SSRN: Social Science Research Network, 2016.

Research output: Working paperResearch

TY - UNPB

T1 - Wall Street Crosses Memory Lane

T2 - How Witnessed Returns Affect Professionals' Expected Returns

AU - Hoffmann, Arvid O. I.

AU - Iliewa, Zwetelina

AU - Jaroszek, Lena

PY - 2016

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N2 - Witnessing stock-market history in the making creates a vivid story, but does not provide valuable information. However, finance professionals extrapolate from personally witnessed returns, which we show by using a unique dataset about the timing of their career start in the finance industry. This result is robust when controlling for all publicly available information and other time-fixed effects as well as interpersonal differences. Additionally, we find that returns witnessed early in the career are more formative than those witnessed recently. Finally, among the potential channels through which witnessed returns might affect expected returns, a judgmental bias appears most plausible.

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

KW - Finance professionals

KW - Expected returns

KW - Non-informative observations

KW - Early career experiences

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Hoffmann AOI, Iliewa Z, Jaroszek L. Wall Street Crosses Memory Lane: How Witnessed Returns Affect Professionals' Expected Returns. www: SSRN: Social Science Research Network. 2016.