It seems you never forget your first stock. A new study, Love at First Trade, finds people form a surprisingly strong attachment to their debut stock – even when it doesn’t love them back.
Researchers analysed trading records of Chinese retail investors from 2013 to 2016 and found a persistent “first stock bias”. Investors kept buying their first stock again and again – more often, and with more money, than any other.
This held true whether it had made or lost them money.
Some investors even chase stocks in the same industry, hoping lightning will strike twice. It rarely does: returns from rebuying the first stock tend to underperform.
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Men are especially prone, particularly if their first trade was a winner. Experience is no cure: seasoned investors were more biased, not less.
The primacy effect is well known in psychology. This study shows how stubbornly it shapes portfolios.
“First love is often beautiful, yet blind – and sometimes painful,” the authors conclude. The same, it seems, goes for that first trade.
