Δρ. Constantinos Antoniou

Stock returns convey information to investors about fundamental values. But do all investors perceive a specific stock return in the same way? Using a large dataset of individual investor stock selling decisions, we show that the same return is perceived differently by different investors, and that these differences are driven by the comparison of a given return to investors’ own personal and idiosyncratic experiences of returns in the small set of stocks that they own. The effect is large. When a given return is classed as extreme compared to an investor’s personal history of returns, the response of investors toward that return increases by a factor of 3.5. Whereas stock returns are commonly considered to be objective, our findings suggest that there is considerable subjectivity in their perception.

Date: 04 November 2021

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