According to the traditional view held in finance returns of assets are determined by complete rationality of decision makers. Rational decisions are defined by a set of axioms that are universal and do not leave room for cultural differences. In this article we show that cultural differences do...

We conduct controlled experiments in order to analyze individual trading behavior. Our results suggest that investors measure their gains relative to their initial wealth, and that this reference point together with past stock price changes determine the portfolio choices. Subjects choose a...