Familiarity Breeds Short-Termism

25/05/2023 - 25/05/2023

Familiarity Breeds Short-Termism

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Familiarity Breeds Short-Termism

Speaker: Ellapulli Vasudevan, Assistant Professor of Finance & Accounting, Indian Institute of Management Ahmedabad

Abstract: Investors exhibit a robust and systematic pattern of shortening their holding period in a stock on which they execute multiple round trip trades.  On average, the holding period shortens by 11% with each additional round trip.  I show this tendency to be short-termed is associated with reinforcement learning.  Investors are more likely to shorten the holding period after a round trip where they could have realized a better return had they sold earlier.  Investors become short-termed as they become more familiar with trading a stock.

Bio: Dr. Ellapulli Vasudevan is currently part of the Finance and Accounting faculty group at IIMA. Before joining IIMA, Dr. Vasudevan was an Assistant Professor of Finance at ESCP Business School, Paris. He holds a Ph.D. from Aalto Business School in Finland. Dr. Vasudevan's research interests are in behavioral finance, focusing on retail investor behavior. He also studies labor implications of policies in the financial sector. Dr. Vasudevan has delivered research seminars at some leading European business schools, such as ESCP Paris, Manchester Business School, and SSE Stockholm, and leading Indian schools, such as IIMA, IIMB, and ISB Hyderabad. He has delivered and discussed research at international conferences such as European Retail Investor Conference, World Finance Conference, New Zealand Finance Summit, Nordic Finance Network Conference, etc. He has published in Management Science, an FT top 50 Journal, and his research is cited by some of the leading financial media, including FT, Bloomberg, and the NY Times. Before his doctorate, Dr. Vasudevan did PGDM from IIM Indore and B-Tech from IIT Roorkee. He teaches topics related to financial markets and advanced investment and wealth management topics.