Endowment Effects in the Field: Evidence from India's IPO Lotteries
Winners of randomly assigned initial public offering (IPO) lottery shares are significantly more likely to hold the shares of the company than lottery losers 1, 6, and even 24 months after the lottery allocation. These effects persist in samples of wealthy and highly active players, and we provide additional evidence that this type of "endowment" effect is not driven by wealth effects or inertia alone. The effect decreases as experience in the IPO market increases, but persists even for the most experienced players. These results suggest that players' preferences and/or beliefs about an asset are not independent of ownership, providing field evidence derived from the behavior of 1.5 million Indian stock investors which is in line with the large laboratory literature that documents such effects.