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Author: Quang Viet Vu
Publisher:
ISBN:
Category : Chief executive officers
Languages : en
Pages : 242
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Author: Quang Viet Vu
Publisher:
ISBN:
Category : Chief executive officers
Languages : en
Pages : 242
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Author: Michael Young
Publisher:
ISBN:
Category :
Languages : en
Pages : 328
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Over the last two decades, there has been a significant increase in research related to behavioral finance. As Barberis and Thaler (2002) point out, there are two main aspect of behavioral finance: limits to arbitrage and the effects of psychology. My dissertation will focus on the second aspect, the effects of psychology on individual investor behavior. The first essay examines an important question in this behavioral finance literature: changes in aggregate risk aversion. I use changes in the level of terrorism in the United States as a shock to the aggregate mood of American investors, and examine changes in flows to mutual funds as a proxy for investor risk preferences. After examining investors vulnerable to changes in mood after attacks, and ruling out any possible effect due to changes in expect risk, and changes to expected returns, the first essay concludes that mood driven risk aversion is the likely cause of the change in behavior. In the second essay, we use the insights gained from Essay 1 regarding the change in behavior of U.S. investors following an increase in terrorist attacks. Using household level of equity market participation and individual trading data the second essay examines the array of decisions investors make. The second essay finds that households participate less in equity markets, trade less, but purchase more local stocks in response to terrorist attacks. Additionally, this change in behavior is especially apparent in households where the designated head is a male. Finally, in the third essay we turn away from terrorism, and examine the effects that local NFL team performance on equity market participation. Examining the most popular spectator sport in the U.S. the third essay shows that poor performance by local NFL teams correlates with fewer households in that state owning equity. While previous studies argue that sentiment is the driver of sports related behavior, the third essay find that gambling losses may also play a role in the drop in equity market participation following seasons with a low number of wins. Taken together, the dissertation demonstrates the importance of examining external shocks and the effect they have on the behavior of investors. From terrorism to something as seemingly benign as the NFL, the dissertation adds to the behavior finance literature by identifying new shocks that effect the investing behavior of individuals.
Author: Sujung Choi
Publisher:
ISBN: 9781267533203
Category :
Languages : en
Pages : 112
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This dissertation consists of two essays. In the first essay, "Investor misvaluation, signaling, and takeovers: Evidence from closed-end fund discounts", I investigate investor misvaluation as a motivation for closed-end fund mergers and acquisitions (M & As). Following previous studies, I view the closed-end fund discount as a proxy for investor misvaluation at the individual fund level. When a closed-end fund suffers from investor misvaluation in the stock market, closed-end fund M & As can be served to investors to signal a rosy prospect for the closed-end fund, or a synergy effect. Using comprehensive data of closed-end fund M & As from 1994 through 2009, I find that (1) both acquirer and target funds experience deep fund discounts over pre-announcement periods and (2) acquirer funds are less likely to be undervalued than target funds, and target funds are more deeply undervalued than acquirer funds when M & As occur. After M & A announcements, fund discounts shrink for targets, but go slightly deeper for acquirers. In the long run, fund discounts of the combined funds shrink even for acquirers, and the misvaluation on acquirer and target closed-end funds is corrected. Post-merger objective-adjusted performance initially improves for both acquirer and target funds because of the synergies perceived by investors, but generally worsens on average in the third year following the M & As. In the second essay, "Herding among individual investors in the Korean stock market", I investigate whether herding among local individual investors exists in the Korean stock market. I examine the hypothesis of whether a potential investor's decision, such as picking a particular stock within a given period, correlates with the decisions of neighbors living in the same area. Using a unique dataset on individual online and offline trading obtained from a brokerage firm in Korea, I analyze the buying and selling transactions of 10,000 individual accounts from February 1999 to December 2005. By employing the herding measure proposed by Lakonishok, Shleifer, and Vishny (1992), I report that individual investors herd on a given stock-month and stock-day. Offline investors in the same local area exhibit stronger herding compared to online investors. Using OLS regressions, I find that own-area effects, or correlated trades by individual investors who are geographically close, are stronger compared to other-area effects in both contemporaneous and lagged coefficients. Investors who are male, wealthy, and non-religious tend to invest more in the stock market compared to investors who are female and Protestant.
Author: Andrei Shleifer
Publisher: OUP Oxford
ISBN: 0191606898
Category : Business & Economics
Languages : en
Pages : 225
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The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
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: Colleen Tokar Asaad
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 305
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This dissertation examines two inter-related topics in finance: Cultural Finance and Behavioral Finance. Both Cultural Finance and Behavioral Finance assume that humans are boundedly rational or irrational, thus rejecting traditional or neoclassical notions of pure rationality. Specifically, this dissertation considers how the values and attitudes of nations influence financial decision-making of countries and companies (Cultural Finance) and how cognitive and social factors influence the financial decision-making of households and individuals (Behavioral Finance).
Author: Thérèse Lind
Publisher: Linköping University Electronic Press
ISBN: 9176850609
Category :
Languages : en
Pages : 27
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I wrote this thesis to create a better understanding of how individual characteristics influence our feelings, our behavior and our way of interpreting information. My focus is on financial behavior and financial information, however I also consider a political context. I investigate the (usually) enabling abilities of financial literacy and numeracy. I also consider impediments such as stereotype threat and motivated reasoning, which can prevent people from engaging in certain behaviors or from interpreting information objectively. Both processes stem from valued beliefs and psychological foundations, consequently peoples’ efforts, decisions, and evaluations are based on them. The first essay, “Competence, confidence, and gender: The role of perceived and actual financial literacy in household finance,” broadens our understanding of the benefits of financial competence. I contrast perceived and actual levels of financial literacy, and consider the role of numeracy and cognitive reflective ability. I conclude that perceived and actual levels of financial literacy positively affect behavior and wellbeing; however, perceived financial literacy more so than actual financial literacy. No such effect is observed for numeric ability and cognitive reflection. Furthermore, women are more anxious about financial matters even though they tend to engage more frequently in the considered financial behaviors. The second essay, “Threatening finance? Examining the gender gap in financial literacy,” continues my exploration of the relationship between gender and financial literacy. In a series of studies, I investigate whether the observed gender gap in financial literacy can be identified in nonnumerical contexts, if it can be associated with confidence in financial matters, and if it can be attributed to stereotype threat, which posits that inbuilt prejudices about gender and finance undermine women’s performance of tasks that involve finance. The results show that the observed gender gap in financial literacy is robust even in nonnumerical financial contexts and suggest that a stereotype threat for women in the financial domain might be present. The gender gap in financial literacy could not be attributed to a difference in (displayed) confidence. In the third essay, “Preferences for lump-sum over divided payment structures,” I investigate whether or not people display systematic preferences for lump–sum or divided payment structures and how these preferences differ in gain (benefit) and loss (payment) situations. I investigate what happens when payments belong to a single underlying event, such as when people can choose to pay immediately or in installments. I also examine whether or not individual differences in time preferences, risk preferences, numeracy, and financial literacy are associated with preferences for one payment structure or the other. The aggregate results show a tendency for people to prefer obtaining and paying money in lump sums. I find no systematic indication that the considered individual differences play a role in this type of decision. The fourth essay, “Motivated reasoning when assessing the effect of refugee intake,” inquires into differences in worldview ideology, whether people identify as nationally or globally oriented, hinder them from objectively interpreting information. I use an experiment to find out if people display motivated reasoning when interpreting numerical information about the effects of refugees on the crime rate. Our results show evidence of motivated reasoning along the lines of worldview ideology. However, individuals with higher numeric ability were less likely to engage in motivated reasoning, leading to the conclusion that motivated reasoning is more likely to be driven by feelings and emotional cues than by deliberate analytical processes.
Author: Javier Rodríguez
Publisher:
ISBN:
Category : Investments
Languages : en
Pages : 132
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Author: Allie Schwartz
Publisher:
ISBN: 9780549036463
Category :
Languages : en
Pages : 166
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The idea that individuals make mistakes in financial decisions has been explored in recent literature. This dissertation examines these mistakes in two financial contexts: mortgage decisions and equity investment. The first chapter demonstrates that some households, in particular, more educated households and households which remember their mortgage terms tend to refinance more profitably than others. Furthermore, living with neighbors who make sound decisions is correlated with profitable refinancing. In the second chapter, I study the historical demand for adjustable mortgages and find that adjustable mortgage ownership more prevalent in the tails of the education, wealth, and debt distributions. Furthermore, educated, wealthy households show evidence of market timing their decision to switch between adjustable and fixed rate mortgages. The final chapter examines stock investment decisions of individuals versus institutions. By using a new method to infer high frequency institutional ownership, we are able to observe how institutions and individuals trade as a group. We find that institutions trade with short-term losses and longer term gains. We also show that they exploit one type of trading strategy---the post earnings announcement drift.
Author: Michael Schneider
Publisher:
ISBN:
Category :
Languages : en
Pages : 83
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