| Summary: | Studies showed that prior outcomes do influence current decisions while we are interested in how prior performance affects individual investors’ risk taking behavior. Tracking 2,947 individual investors’ transaction in Taiwan Top50 Tracker Fund from June 2003 till December 2006, our empirical results indicate both the former risk taking and prior profits have significant influences on individual investors’ later risk taking behavior. We find a positive relation between later risk taking and prior gains but a negative relation between later risk taking and prior losses. Furthermore, according to the amount of prior gains and losses, we find those who experience large sum of gains or losses take far higher risks than those who have modest prior gains or losses.
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