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Author: Amira Yasser Ragab
Publisher:
ISBN:
Category : Hypothesis
Languages : en
Pages : 96
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Book Description
Abstract: The overreaction hypothesis, as postulated by De Bondt and Thaler (1985) dictates that "stocks that have performed poorly in the past (loser stocks) tend to outperform stocks that have performed well in the past (winner stocks)" (DeBondt, et al., 1985). On the other hand, the under-reaction hypothesis argues that stock's return shows momentum, whereby winner stocks continue to exhibit high returns in future periods, reflecting tendency of investors to under-weigh the extent of new information. The aim of this thesis is to investigate whether short-term overreaction or under-reaction appears in the Egyptian Exchange (EGX) over the period of January 1998 to December 2013, making this the first attempt to test these market anomalies in an Arab stock market. The thesis surveys the overreaction/under-reaction literature focusing on the differences in methodologies and results across the various sample markets and timeframes. The thesis compares two standard methodologies in the literature, that of Ali et al (2011) and Clare & Thomas (1995), to test the overreaction/under-reaction hypothesis over various holding periods ranging from one week to 52 weeks. The analysis reveals that while short-term overreaction doesn't exist in the Egyptian Exchange, there is statistically significant evidence of under-reaction for the holding periods of one to four weeks. This motivates further tests to establish the profitability of utilizing this evidence of under-reaction by applying a momentum strategy that invests in winner stocks. The results show that while a momentum strategy can provide significant abnormal returns of up to 0.885% over a holding period of four weeks, when trading costs are taken into account, the profitability of the momentum strategy becomes insignificant. The thesis further analyzes whether size of the company can explain the evidence of under-reaction. This is done on the basis of creating portfolios with large and small capitalization stocks. For large capitalization stocks, an under-reaction that is statistically significant over holding periods from 1 to 3 weeks is found. The overall result for this thesis suggests that while evidence of under-reaction appears for Egyptian listed stocks, this is concentrated in large firms. Investor, however, cannot profit from this market anomaly by applying a momentum strategy since after taking into account trading costs involved in trading Egyptian stocks, the profitability of this strategy diminishes.
Author: Amira Yasser Ragab
Publisher:
ISBN:
Category : Hypothesis
Languages : en
Pages : 96
Get Book Here
Book Description
Abstract: The overreaction hypothesis, as postulated by De Bondt and Thaler (1985) dictates that "stocks that have performed poorly in the past (loser stocks) tend to outperform stocks that have performed well in the past (winner stocks)" (DeBondt, et al., 1985). On the other hand, the under-reaction hypothesis argues that stock's return shows momentum, whereby winner stocks continue to exhibit high returns in future periods, reflecting tendency of investors to under-weigh the extent of new information. The aim of this thesis is to investigate whether short-term overreaction or under-reaction appears in the Egyptian Exchange (EGX) over the period of January 1998 to December 2013, making this the first attempt to test these market anomalies in an Arab stock market. The thesis surveys the overreaction/under-reaction literature focusing on the differences in methodologies and results across the various sample markets and timeframes. The thesis compares two standard methodologies in the literature, that of Ali et al (2011) and Clare & Thomas (1995), to test the overreaction/under-reaction hypothesis over various holding periods ranging from one week to 52 weeks. The analysis reveals that while short-term overreaction doesn't exist in the Egyptian Exchange, there is statistically significant evidence of under-reaction for the holding periods of one to four weeks. This motivates further tests to establish the profitability of utilizing this evidence of under-reaction by applying a momentum strategy that invests in winner stocks. The results show that while a momentum strategy can provide significant abnormal returns of up to 0.885% over a holding period of four weeks, when trading costs are taken into account, the profitability of the momentum strategy becomes insignificant. The thesis further analyzes whether size of the company can explain the evidence of under-reaction. This is done on the basis of creating portfolios with large and small capitalization stocks. For large capitalization stocks, an under-reaction that is statistically significant over holding periods from 1 to 3 weeks is found. The overall result for this thesis suggests that while evidence of under-reaction appears for Egyptian listed stocks, this is concentrated in large firms. Investor, however, cannot profit from this market anomaly by applying a momentum strategy since after taking into account trading costs involved in trading Egyptian stocks, the profitability of this strategy diminishes.
Author: Lucy F. Ackert
Publisher: South Western Educational Publishing
ISBN: 9780538752862
Category : Investments
Languages : en
Pages : 0
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Book Description
The book begins by building upon the established, conventional principles of finance that you've have already learned in your principles course. The authors then move into psychological principles of behavioral finance, including heuristics and biases, overconfidence, emotion and social forces. You immediately see how human behavior influences the decisions of individual investors and professional finance practitioners, managers, and markets. You also gain a strong understanding of how social forces impact individuals' choices. The book clearly explains what behavioral finance indicates about observed market outcomes as well as how psychological biases potentially impact the behavior of managers. The book's solid academic approach provides opportunities for you to utilize theory and complete applications in every chapter as you learn the implications of behavioral finance on retirement, pensions, education, debiasing, and client management. The book spends a significant amount of time examining how today's practitioners can use behavioral finance to further their professional success.
Author: The late Lawrence R. Klein
Publisher: Edward Elgar Publishing
ISBN: 9781781950500
Category : Business & Economics
Languages : en
Pages : 434
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Book Description
There is much confusion in the economics literature on wage determination and the employment-inflation trade-off. Few model builders pay as much careful attention to the definition and meaning of long-run concepts as did Albert Ando. Expanding on years of painstaking work by Ando, the contributors elaborate on the main issues of economic analysis and policies that concerned him.
Author: Simon Grima
Publisher: Emerald Group Publishing
ISBN: 180043930X
Category : Business & Economics
Languages : en
Pages : 480
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Book Description
This international exploration on different economic systems provides a comprehensive account which brings a wide range of countries to the forefront in terms of both comparability and accountability, this study shines a light on the differences in systems between states, and provides information to equip readers to minimize those differences.
Author: Richards J Heuer
Publisher: Pickle Partners Publishing
ISBN: 1839743050
Category : History
Languages : en
Pages : 344
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Book Description
In this seminal work, published by the C.I.A. itself, produced by Intelligence veteran Richards Heuer discusses three pivotal points. First, human minds are ill-equipped ("poorly wired") to cope effectively with both inherent and induced uncertainty. Second, increased knowledge of our inherent biases tends to be of little assistance to the analyst. And lastly, tools and techniques that apply higher levels of critical thinking can substantially improve analysis on complex problems.
Author: Bjørn Espen Eckbo
Publisher: Elsevier
ISBN: 0080488919
Category : Business & Economics
Languages : en
Pages : 559
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Book Description
Judging by the sheer number of papers reviewed in this Handbook, the empirical analysis of firms’ financing and investment decisions—empirical corporate finance—has become a dominant field in financial economics. The growing interest in everything “corporate is fueled by a healthy combination of fundamental theoretical developments and recent widespread access to large transactional data bases. A less scientific—but nevertheless important—source of inspiration is a growing awareness of the important social implications of corporate behavior and governance. This Handbook takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues, ranging from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior. The surveys are written by leading empirical researchers that remain active in their respective areas of interest. With few exceptions, the writing style makes the chapters accessible to industry practitioners. For doctoral students and seasoned academics, the surveys offer dense roadmaps into the empirical research landscape and provide suggestions for future work. *The Handbooks in Finance series offers a broad group of outstanding volumes in various areas of finance *Each individual volume in the series should present an accurate self-contained survey of a sub-field of finance *The series is international in scope with contributions from field leaders the world over
Author: Richard H. Thaler
Publisher: Russell Sage Foundation
ISBN: 9780871548443
Category : Business & Economics
Languages : en
Pages : 628
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Book Description
Modern financial markets offer the real world's best approximation to the idealized price auction market envisioned in economic theory. Nevertheless, as the increasingly exquisite and detailed financial data demonstrate, financial markets often fail to behave as they should if trading were truly dominated by the fully rational investors that populate financial theories. These markets anomalies have spawned a new approach to finance, one which as editor Richard Thaler puts it, "entertains the possibility that some agents in the economy behave less than fully rationally some of the time." Advances in Behavioral Finance collects together twenty-one recent articles that illustrate the power of this approach. These papers demonstrate how specific departures from fully rational decision making by individual market agents can provide explanations of otherwise puzzling market phenomena. To take several examples, Werner De Bondt and Thaler find an explanation for superior price performance of firms with poor recent earnings histories in the tendencies of investors to overreact to recent information. Richard Roll traces the negative effects of corporate takeovers on the stock prices of the acquiring firms to the overconfidence of managers, who fail to recognize the contributions of chance to their past successes. Andrei Shleifer and Robert Vishny show how the difficulty of establishing a reliable reputation for correctly assessing the value of long term capital projects can lead investment analysis, and hence corporate managers, to focus myopically on short term returns. As a testing ground for assessing the empirical accuracy of behavioral theories, the successful studies in this landmark collection reach beyond the world of finance to suggest, very powerfully, the importance of pursuing behavioral approaches to other areas of economic life. Advances in Behavioral Finance is a solid beachhead for behavioral work in the financial arena and a clear promise of wider application for behavioral economics in the future.
Author: Wing-Keung Wong
Publisher: Mdpi AG
ISBN: 9783036530802
Category : Business & Economics
Languages : en
Pages : 232
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Book Description
The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.
Author: Hersh Shefrin
Publisher: Oxford University Press
ISBN: 0199792607
Category : Business & Economics
Languages : en
Pages : 403
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Book Description
Even the best Wall Street investors make mistakes. No matter how savvy or experienced, all financial practitioners eventually let bias, overconfidence, and emotion cloud their judgement and misguide their actions. Yet most financial decision-making models fail to factor in these fundamentals of human nature. In Beyond Greed and Fear, the most authoritative guide to what really influences the decision-making process, Hersh Shefrin uses the latest psychological research to help us understand the human behavior that guides stock selection, financial services, and corporate financial strategy. Shefrin argues that financial practitioners must acknowledge and understand behavioral finance--the application of psychology to financial behavior--in order to avoid many of the investment pitfalls caused by human error. Through colorful, often humorous real-world examples, Shefrin points out the common but costly mistakes that money managers, security analysts, financial planners, investment bankers, and corporate leaders make, so that readers gain valuable insights into their own financial decisions and those of their employees, asset managers, and advisors. According to Shefrin, the financial community ignores the psychology of investing at its own peril. Beyond Greed and Fear illuminates behavioral finance for today's investor. It will help practitioners to recognize--and avoid--bias and errors in their decisions, and to modify and improve their overall investment strategies.
Author: Lester C. Thurow
Publisher: Harper Collins
ISBN: 0061882070
Category : Business & Economics
Languages : en
Pages : 525
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Book Description
The classic text on the post-Cold War economic battle. Starting with the fall of communism, influential economist and former dean of MIT's Sloan School of Management Lester Thurow deftly explores how head-to-head competition -- not military might -- among Japan, the United States, and the newly united European countries would produce the next world leader. As Thurow explains, in the 1990s the race for economic supremacy was only just beginning. In a world no longer governed by two military superpowers, the stage was set for a dramatic shoot-out among the world's most powerful national economies. Using analytical data, key insights, and common sense, Thurow presents a solid economic game plan for the United States to follow in order to win this battle and attain dominance in the global economy.
