Template-Type: ReDIF-Paper 1.0
Title: Associative Memory and Belief Formation
Author-Name: Benjamin Enke
Author-Email: enke@fas.harvard.edu
Author-Name: Frederik Schwerter
Author-Email: frederik.schwerter@uni-koeln.de
Author-Name: Florian Zimmermann
Author-Email: florian.zimmermann@briqinstitute.org


Classification-JEL: D01
Keywords: Beliefs, expectations, memory, bounded rationality

Abstract: Information is often embedded in memorable contexts, which may cue the asymmetric recall of similar past news through associative memory. We design a theorydriven experiment, in which participants observe signals about hypothetical companies. Here, identical signal realizations are communicated with identical contexts:
stories and images. Because participants asymmetrically remember those past signals that get cued by the current context, beliefs systematically overreact. This overreaction depends in predictable ways on the signal history; the correlation between
signals and contexts; and the scope for forgetting and associative memory. We quantify these results by structurally estimating a model of associative recall.

Note: 
Length: 72
Creation-Date: 2020-01
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp148
Handle: RePEc:bon:boncrc:CRCTR224_2020_148