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DPE Tuesday Talk Series: Peiran Jiao, “Investor Memory”

The Division of Politics and Economics invites the CGU community to attend this week’s Tuesday Lunch Talk featuring Peiran Jiao, Assistant Professor of Finance at Maastricht University. Lunch will be provided.

Peiran Jiao obtained a PhD in Economics from Claremont Graduate University in 2014, and BA in Economics from Nankai University (Tianjin, China) in 2008. Jiao’s research focuses on behavioral and experimental finance/economics. He is currently interested in three topics: (1) experience-based learning in financial decision-making and game theory, (2) information processing from the news and social media with implications in asset-pricing, macroeconomic outcomes and politics, and (3) biases in belief updating. His research papers traverse a number of disciplines, such as economics, finance, psychology and neuroscience, with a mixture of theoretical, empirical and experimental approaches. His papers have been published in peer-reviewed journals, such as, Management Science and The Economic Journal. His projects have been funded by the Marie Curie Individual Fellowship, the John Fell Fund, and the Harvard University Foundations of Human Behavior Grant.

Peiran Jiao

Talk Title: Investor Memory

How does memory shape individuals’ financial decisions? Jiao’s research finds experimental evidence of a self-serving memory bias, which distorts beliefs and drives investment choices. Subjects who previously invested in a risky stock are more likely to remember positive investment outcomes and less likely to remember negative outcomes. In contrast, subjects who did not invest but merely observed the investment outcomes do not have this memory bias. Importantly, subjects do not adjust their behavior to account for the fallibility of their memory. After investing, they form overly optimistic beliefs and re-invest in the stock even when doing so reduces their expected return. The memory bias that Jiao documents is relevant for understanding how people form expectations from experiences in financial markets and, more generally, for understanding household financial decision-making.