Santosh Anagol, Vimal Balasubramaniam, Tarun Ramadorai, 17 January 2019

Although economic agents should discern signals from noise when drawing from experience, recent evidence suggests decision-making can be based on both noise and signal components. This column uses a natural experiment of IPO lotteries in India to show that randomised gains cause winning investors to increase applications to future IPOs and substantially increase portfolio trading volume in non-IPO stocks relative to lottery losers. Investors appear to draw inferences about their skill from noise. 

Shoshana Neuman, Einat Neuman, 18 December 2007

The standard assumption in economic theory is that our preferences do not change as a result of experience. The reality, however, may be somewhat different. The authors of CEPR DP6608 examine whether and how preferences for the service they receive differ for women having their first child compared to those with experience of childbirth.

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