Past performance framing and investors' belief updating: Is seeing long-term returns always associated with smaller belief updates?

- Exposes subjects to different return information horizons and measures belief updates.
- Tests whether longer information horizons are associated with smaller updates in beliefs.
- Different from previous studies, experimental subjects can easily opt out of their default.
- Effectiveness of longer information horizons depends on whether subjects opt out of default.

Prior research shows that investors with smaller belief updates trade less actively, which positively affects their return performance. We examine the effect of different default frames of presenting past return information on investors' belief updating. In particular, we analyze whether presenting longer information horizons as a default is associated with smaller belief updates. In lab and online experiments, we expose subjects to different past return information defaults and measure updates in their beliefs. Different from previous research, our subjects can easily opt out of the default to obtain additional information. We find that presenting long-term return information is not effective in reducing belief updates on average. Whereas belief updates are reduced for subjects who remain in their default, for those who opt out, we observe the opposite.