Decision makers often fail to forecast their future feeling, erroneously projecting current preferences onto future preferences, an attribute recently labeled "projection bias" [Loewenstein, G., O'Donoghue, T., Rabin, M., 2003. Projection bias in predicting future utility. Quarterly Journal of Economics 118, 1209-1248]. There is sweeping psychological evidence for the existence of projection bias. Still, a scrutiny of projection bias based on real (rather than experimental) data is lacking. This paper devises and implements such a framework. Using US asset market data, our statistical findings unequivocally support the existence of projection bias in investors' decision-making processes.
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