Research | Sui Pengfei: Stakes and Investor Behaviors

Release time：10 July 2025

Amid the increasing volatility in global financial markets, investors are challenged by a more complex environment for their decision-making. Stakes and Investor Behaviors, a research paper jointly conducted by Professor Sui Pengfei from the School of Management and Economics (SME), The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen), and Professor Wang Baolian from the University of Florida, provides important insights into the factors influencing the effectiveness of investment decisions through an innovative empirical design.

The study leverages a unique comparative analysis method to systematically compare the different behaviors of the same investor in real versus simulated accounts, delving into the impact of stake size on investment decision-making quality. The findings challenge conventional wisdom: Investors exhibit stronger behavioral biases in real transactions with higher stakes than in simulated environments with lower stakes, including disposition effects, lottery-like stock preferences, overextension, and other irrational behaviors. Notably, the finding that stimulated accounts generally outrun real accounts in investment performance has significantly rectified the theory of behavioral finance.

The research is of theoretical value in two ways. It provides a new explanatory framework for the mechanism where stake effect influences investment behaviors and raises an important methodological question on the extrapolation of findings from laboratory environments with lower stakes to real financial scenarios with higher stakes. The findings have significant practical implications in guiding investors’ education, risk management of financial institutions, and regulatory policymaking. The research paper was accepted by the Journal of Financial Economics, a top journal in international finance.