Hot hand and gambler's fallacy in teams: Evidence from investment experiments

• In laboratory experiments we explore the effects of communication and group decision making on investment behavior and on subjects' proneness to behavioral biases. Most importantly, we show that communication and group decision making do not impact subjects' overall proneness to the hot hand fallacy and to the gambler's fallacy. However, groups decide differently than individuals, as they rely significantly less on useless outside advice from "experts" and choose the risk-free option less frequently. Furthermore we document gender differences in investment behavior: groups of two female subjects choose the risk-free investment more often and are marginally more prone to the hot hand fallacy than groups of two male subjects. (C) 2015 The Authors. Published by Elsevier B.V.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business (hsv//eng)

Keyword

Hot hand fallacy

Gambler's fallacy

Experimental finance

Team decision making

mutual fund flows

decision-making

individuals

behavior

risk

performance

incentives

investors

Business & Economics

Publication and Content Type

ref (subject category)

art (subject category)