Primacy in Stock Market Participation: The Effect of Initial Returns on Market Re-Entry Decisions

Ozlem Arikan, Arie Gozluklu, Gi Kim, Hiroaki Sakaguchi

Research output: Contribution to journalArticlepeer-review


We examine whether initial returns influence investors’ decisions to return to the stock market following withdrawal. Using a survival analysis technique to estimate Finnish retail investors’ likelihood of stock market re-entry reveals that investors who experience lower initial returns are less likely to return, even after controlling for returns in the last month and average monthly returns for the duration of investing. This primacy effect is robust to accounting for endogeneity in investors’ exit decisions, and other behavioural biases such as recency and saliency of investment experience. Individual investors appear to be subject to primacy bias and tend to put a significant weight on initial experiences in re-entry decisions.
Original languageEnglish
Pages (from-to)883-909
Number of pages27
JournalEuropean Journal of Finance
Issue number10
Early online date11 Apr 2018
Publication statusPublished - 3 Jul 2019

Bibliographical note

This is an Accepted Manuscript of an article published by Taylor & Francis Group in The European Journal of Finance on 10 April 2018, available online at:


  • Individual investor behaviour
  • experiential learning
  • primacy effect
  • stock market participation
  • stock market re-entry decision


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