Template-Type: ReDIF-Article 1.0 Author-Name: Shinhua Liu Author-X-Name-First: Shinhua Author-X-Name-Last: Liu Title: S&P 500 Affiliation and Stock Price Informativeness Abstract: When firms are added to a stock index, more information should be discovered, traded on, and incorporated into their stock prices, making them more informative. We test this hypothesis using a large sample of additions to the S&P 500 index. Using two alternative statistical tests, we find that the stocks added experience more random, less predictable return and, thus, appear to be priced more efficiently information-wise. We further find concurrent increases in institutional ownership and investor awareness, which tend to contribute to the higher pricing efficiency, adding to the literature. These findings should be of interest to academics and practitioners. Journal: Journal of Behavioral Finance Pages: 219-232 Issue: 3 Volume: 21 Year: 2020 Month: 7 X-DOI: 10.1080/15427560.2019.1672073 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1672073 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:3:p:219-232 Template-Type: ReDIF-Article 1.0 Author-Name: Benjamin M. Blau Author-X-Name-First: Benjamin M. Author-X-Name-Last: Blau Author-Name: R. Jared DeLisle Author-X-Name-First: R. Jared Author-X-Name-Last: DeLisle Author-Name: Ryan J. Whitby Author-X-Name-First: Ryan J. Author-X-Name-Last: Whitby Title: Does Probability Weighting Drive Lottery Preferences? Abstract: We propose a test of the theory of skewness preferences. The probability weighting feature that is the basis of their theory relies on investors overweighting the probability of extreme, positive returns. The resulting investor preferences for positive skewness in return distributions will lead to excess demand, contemporaneous price premiums, and negative expected returns. We use the well-documented 52-week high bias as a method to truncate investors’ weighted probability of expected right-tail events. We find evidence supporting the theoretical framework of Barberis and Huang as the negative return premiums associated with positive skewness is driven almost entirely by stocks that are farther away from the their 52-week high. No negative premiums related to skewness are detected when stock prices are close to the 52-week high. Journal: Journal of Behavioral Finance Pages: 233-247 Issue: 3 Volume: 21 Year: 2020 Month: 7 X-DOI: 10.1080/15427560.2019.1672167 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1672167 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:3:p:233-247 Template-Type: ReDIF-Article 1.0 Author-Name: June Dung Pham Author-X-Name-First: June Dung Author-X-Name-Last: Pham Author-Name: Thanh Nguyen Author-X-Name-First: Thanh Author-X-Name-Last: Nguyen Author-Name: Hari Adhikari Author-X-Name-First: Hari Author-X-Name-Last: Adhikari Author-Name: Trang Minh Pham Author-X-Name-First: Trang Minh Author-X-Name-Last: Pham Title: Unexpected Share Repurchase Announcements Abstract: Open-market stock repurchase announcements are generally perceived by the stock market as a signal of firm undervaluation. Our study shows that repurchase announcements that were preceded by SEOs of other firms in the same industry within the prior six months (namely SEO-RPs) are more likely the result of lacking investment opportunities than signaling undervaluation, especially in concentrated industries. Specifically, we find investors response negatively to SEO-RP announcements while react positively to regular repurchase announcements. The higher the intensity of SEO activities in the industry, the more negative market reaction to SEO-RP announcements. We argue that the market doesn’t expect a repurchase announcement when other rival firms are raising more capital via SEOs. These SEO-RPs represent a negative surprise to the market and lead to a downward adjustment in value of the repurchasing firms in the announcement window. In the three-year post-announcement periods, the SEO-RP firms underperform regular repurchasing firms in both stock return and operating performance. Moreover, while regular repurchasing firms gradually increase their capital expenditures, SEO-RP firms significantly reduce their capital expenditures. These findings support our arguments that repurchase announcements that immediately follow SEOs of rival firms (SEO-RPs) more likely indicate the announcing firms entering a slower growth rate with fewer investment opportunities than signal the undervaluation problem. The underperformance in stock return and operation combined with a significant reduction in capital expenditures in the post-announcement periods are consistent with this logic and also explain why the market reacts negatively to SEO-RP announcements. Journal: Journal of Behavioral Finance Pages: 248-265 Issue: 3 Volume: 21 Year: 2020 Month: 7 X-DOI: 10.1080/15427560.2019.1692208 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692208 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:3:p:248-265 Template-Type: ReDIF-Article 1.0 Author-Name: Tobias Meyll Author-X-Name-First: Tobias Author-X-Name-Last: Meyll Author-Name: Thomas Pauls Author-X-Name-First: Thomas Author-X-Name-Last: Pauls Author-Name: Andreas Walter Author-X-Name-First: Andreas Author-X-Name-Last: Walter Title: Why do Households Leave Money on the Table? The Case of Subsidized Pension Products Abstract: Many individuals only save money in their savings account for their old-age provision rather than investing in more profitable asset classes. That is despite the existence of subsidized pension products, for which smallest contributions can be made monthly, which guarantee the capital preservation, and which offer higher expected returns than saving money in bank deposits. We investigate the determinants that affect individuals’ decision to leave money on the table by not investing in subsidized pension products. Our results show that financial literacy and financial advice are positively related to holding such pension products. In that, our results emphasize the role of financial literacy and financial advisors for sound financial decision-making in increasingly complex financial markets. Journal: Journal of Behavioral Finance Pages: 266-283 Issue: 3 Volume: 21 Year: 2020 Month: 7 X-DOI: 10.1080/15427560.2019.1692209 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692209 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:3:p:266-283 Template-Type: ReDIF-Article 1.0 Author-Name: Eben Otuteye Author-X-Name-First: Eben Author-X-Name-Last: Otuteye Author-Name: Mohammad Siddiquee Author-X-Name-First: Mohammad Author-X-Name-Last: Siddiquee Title: Underperformance of Actively Managed Portfolios: Some Behavioral Insights Abstract: Two glaring anomalies in investment management are apparent: (1) after fees, active portfolio managers do worse than market indices, and (2) clients continue to pay for services they don’t receive. The purpose of this paper is to offer explanations of these anomalies from a behavioral perspective. We explore some of the cognitive biases that perpetuate active management and subsequent underperformance, including herding, disposition, and endowment effects, as well as conservatism and status quo biases, overconfidence, and agency problems. Investors’ continued use of active managers despite persistent disappointing returns is attributed to being victims of framing effect, hot-hand fallacy, lack of knowledge as well as intimidation or insecurity, and status quo bias. We propose some ways that portfolio managers and investors could improve their decision making. Journal: Journal of Behavioral Finance Pages: 284-300 Issue: 3 Volume: 21 Year: 2020 Month: 7 X-DOI: 10.1080/15427560.2019.1692210 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692210 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:3:p:284-300 Template-Type: ReDIF-Article 1.0 Author-Name: Sanjay Rastogi Author-X-Name-First: Sanjay Author-X-Name-Last: Rastogi Author-Name: Saurabh Gupta Author-X-Name-First: Saurabh Author-X-Name-Last: Gupta Title: Development of Scale to Measure Objectives-Oriented Investment Behavior Abstract: While planning for personal finances, researchers recommend investors adapting systematically planned investment behaviors that align investments with their financial objectives; however, they fail to provide a scale for the measurement of such behaviors. Therefore, this study develops a scale, conducts exploratory and confirmatory factor analysis, and provides evidence of the reliability of the scale measuring objectives-oriented investment behaviors. Examining a cross-sectional data of 448 investors collected through the new scale, the study finds that a majority of the investors’ do not follow objectives-oriented behavior. The results inform that the selection of investment avenues and allocation of funds were not aligned with investors’ financial objectives. Journal: Journal of Behavioral Finance Pages: 301-310 Issue: 3 Volume: 21 Year: 2020 Month: 7 X-DOI: 10.1080/15427560.2019.1692346 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692346 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:3:p:301-310 Template-Type: ReDIF-Article 1.0 Author-Name: Haijun Yang Author-X-Name-First: Haijun Author-X-Name-Last: Yang Author-Name: Wei Xia Author-X-Name-First: Wei Author-X-Name-Last: Xia Title: Private Information Transmission, Momentum and Reversal Abstract: We propose a simple model of information transmission and price dynamics to investigate that private information can contribute to both momentum and reversal. The prior literature only suggests that public information can correct the bias of price and cause a reversal. In a word-of-mouth transmission process, the heterogeneity of investors depends on the private information that they have. We incorporate self-updating private information into our model and find that price increases at first and then decreases under certain conditions. This paper provides a unified explanation for momentum and reversal in the view of private information. Moreover, our empirical results verify our theoretical conclusions. Journal: Journal of Behavioral Finance Pages: 311-322 Issue: 3 Volume: 21 Year: 2020 Month: 7 X-DOI: 10.1080/15427560.2019.1692847 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692847 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:3:p:311-322 Template-Type: ReDIF-Article 1.0 Author-Name: Jessica West Author-X-Name-First: Jessica Author-X-Name-Last: West Author-Name: Carol Azab Author-X-Name-First: Carol Author-X-Name-Last: Azab Author-Name: K. C. Ma Author-X-Name-First: K. C. Author-X-Name-Last: Ma Author-Name: Michael Bitter Author-X-Name-First: Michael Author-X-Name-Last: Bitter Title: Numerosity: Forward and Reverse Stock Splits Abstract: Individuals have a tendency to fixate on large numbers and ignore other relevant information in their decision making process. The numerosity heuristic, a cognitive bias, is the first behavioral hypothesis to explain why investors prefer to receive more shares (rather than less shares) in a stock split even though the aggregate economic value is the same. For forward splits, after controlling for the positive signaling of improved earnings growth and liquidity from the split announcement, the stock price reacts positively to the larger number of shares issued. More importantly, the use of a dual class numerosity model can explain why most conventional hypotheses fail to explain the negative stock price reaction to reverse splits. Given a typical bearish outlook associated with a reverse stock split, investors’ cognitive resources have already been conditioned to derive a systematic conclusion to sell the stock at the higher price. Focusing only on large stock price numerosity, investors are incorrectly inferring a higher investment value. As the high numerosity encourages bearish investors to sell at the higher perceived investment value, the stock returns react more negatively to the higher post-reverse split price level. In both forward and reverse split cases, investors react to high numerosity. Journal: Journal of Behavioral Finance Pages: 323-335 Issue: 3 Volume: 21 Year: 2020 Month: 7 X-DOI: 10.1080/15427560.2019.1672168 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1672168 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:3:p:323-335 Template-Type: ReDIF-Article 1.0 Author-Name: Tim Loughran Author-X-Name-First: Tim Author-X-Name-Last: Loughran Author-Name: Bill McDonald Author-X-Name-First: Bill Author-X-Name-Last: McDonald Title: The Use of Word Lists in Textual Analysis Abstract: A commonly used platform to assess the tone of business documents in the extant accounting and finance literature is Diction. We argue that Diction is inappropriate for gauging the tone of financial disclosures. About 83% of the Diction optimistic words and 70% of the Diction pessimistic words appearing in a large 10-K sample are likely misclassified. Frequently occurring Diction optimistic words like respect, security, power, and authority will not be considered positive by readers of business documents. Similarly, over 45% of the Diction pessimistic 10-K word-counts are not and no. The Loughran-McDonald [2011] dictionary appears better at capturing tone in business text than Diction. Journal: Journal of Behavioral Finance Pages: 1-11 Issue: 1 Volume: 16 Year: 2015 Month: 1 X-DOI: 10.1080/15427560.2015.1000335 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1000335 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:1:p:1-11 Template-Type: ReDIF-Article 1.0 Author-Name: Yang Zhang Author-X-Name-First: Yang Author-X-Name-Last: Zhang Author-Name: Hong Zhang Author-X-Name-First: Hong Author-X-Name-Last: Zhang Author-Name: Michael J. Seiler Author-X-Name-First: Michael J. Author-X-Name-Last: Seiler Title: Impact of Information Disclosure on Prices, Volume, and Market Volatility: An Experimental Approach Abstract: This study integrates experimental design with econometric techniques to examine the impact of information disclosure on trading prices, trading volume, and market volatility. Using a double auction model, we find that as information disclosure increases, trading prices and trading volume remain the same. However, the volatility in the marketplace is significantly reduced. This overall market efficiency gain is robust to a number of different efficiency metrics. Journal: Journal of Behavioral Finance Pages: 12-19 Issue: 1 Volume: 16 Year: 2015 Month: 1 X-DOI: 10.1080/15427560.2015.1000333 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1000333 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:1:p:12-19 Template-Type: ReDIF-Article 1.0 Author-Name: F. Douglas Foster Author-X-Name-First: F. Douglas Author-X-Name-Last: Foster Author-Name: Geoffrey J. Warren Author-X-Name-First: Geoffrey J. Author-X-Name-Last: Warren Title: Why Might Investors Choose Active Management? Abstract: We investigate why investors may be willing to participate in active management, notwithstanding expectations for negative average alpha after fees across all managers. Our approach involves modeling the expected outcome from investing in a portfolio of active managers, for investors who believe they have ability to select good managers and may anticipate benefits from replacing managers when alpha expectations fall. Numerical calibrations using inputs consistent with the literature find that certain investors can credibly invest through active managers at observed fee levels, most notably institutions. However, participation in active management at fees paid by some retail investors can only be explained by allowing for behavioral biases. Our analysis suggests that the wide use of active management reflects a diversity of investors who form expectations based on information other than expected alpha for the average manager, some of which entails cognitive error. Journal: Journal of Behavioral Finance Pages: 20-39 Issue: 1 Volume: 16 Year: 2015 Month: 1 X-DOI: 10.1080/15427560.2015.1000331 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1000331 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:1:p:20-39 Template-Type: ReDIF-Article 1.0 Author-Name: Ryan Garvey Author-X-Name-First: Ryan Author-X-Name-Last: Garvey Author-Name: Fei Wu Author-X-Name-First: Fei Author-X-Name-Last: Wu Title: Adaptive Trading and Longevity Abstract: We examine the relationship between trader longevity and trader behavior changes in U.S. equity markets. Traders who change how much, what, when, and where they trade often remain active for a longer period of time. Although longer (shorter) duration traders tend to perform better (worse), changes in trader behavior rather than in performance are the key determinants of longevity. Overall, our findings suggest that securities traders who are able to adapt and alter how they trade in light of continually changing market conditions are more successful. Journal: Journal of Behavioral Finance Pages: 40-50 Issue: 1 Volume: 16 Year: 2015 Month: 1 X-DOI: 10.1080/15427560.2015.1000328 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1000328 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:1:p:40-50 Template-Type: ReDIF-Article 1.0 Author-Name: Shuming Liu Author-X-Name-First: Shuming Author-X-Name-Last: Liu Title: Investor Sentiment and Stock Market Liquidity Abstract: Recent research on liquidity has reported that aggregate liquidity in the stock market varies over time, and evidence suggests that this variation affects stock returns. Although the importance of market liquidity in asset pricing has been well documented, little is known about what causes stock market liquidity to vary over time. This paper examines whether the time-series variation in stock market liquidity is related to investor sentiment. Using the liquidity measure developed by Amihud [2002] and two survey-based investor sentiment indices, I find that the stock market is more liquid when sentiment indices rise, that is, when investors are more bullish. Moreover, the Granger causality tests suggest that investor sentiment Granger-causes market liquidity. Further analyses show that market trading volume also increases when investor sentiment is higher. In addition, the finding that the market is more liquid when investor sentiment is higher still persists even after controlling for the effect of market trading volume. These results are consistent with the theoretical prediction that investor sentiment increases stock market liquidity. Journal: Journal of Behavioral Finance Pages: 51-67 Issue: 1 Volume: 16 Year: 2015 Month: 1 X-DOI: 10.1080/15427560.2015.1000334 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1000334 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:1:p:51-67 Template-Type: ReDIF-Article 1.0 Author-Name: Emmanuel Morales-Camargo Author-X-Name-First: Emmanuel Author-X-Name-Last: Morales-Camargo Author-Name: Orly Sade Author-X-Name-First: Orly Author-X-Name-Last: Sade Author-Name: Charles Schnitzlein Author-X-Name-First: Charles Author-X-Name-Last: Schnitzlein Author-Name: Jaime F. Zender Author-X-Name-First: Jaime F. Author-X-Name-Last: Zender Title: On the Persistence of Overconfidence: Evidence From Multi-Unit Auctions Abstract: We analyze pre- and post-task confidence in an experiment in which subjects bid in multiunit common value auctions. Subjects return for a second session, so we are able to assess how performance affects the evolution of confidence. Those with low confidence prior to the first session underestimate performance while those with high confidence overestimate performance. Although the average change in pre-experiment confidence from session one to session two is close to zero, the dispersion in confidence increases. For those with moderate initial confidence, the change in confidence depends significantly on performance in session one. For those with high initial confidence, the change in confidence does not depend on performance, and the correlation between confidence prior to session two and confidence prior to session one is significantly higher than for those with neutral or low confidence. Subjects with high initial confidence also base their perception of post-experiment relative performance primarily on pre-experiment confidence, an effect not present in the moderate and low confidence groups. Based on a pre-experiment survey, we also find that those with high initial confidence are more likely to have prior experience trading stocks or options. Journal: Journal of Behavioral Finance Pages: 68-80 Issue: 1 Volume: 16 Year: 2015 Month: 1 X-DOI: 10.1080/15427560.2015.1000330 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1000330 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:1:p:68-80 Template-Type: ReDIF-Article 1.0 Author-Name: Doug Waggle Author-X-Name-First: Doug Author-X-Name-Last: Waggle Author-Name: Pankaj Agrrawal Author-X-Name-First: Pankaj Author-X-Name-Last: Agrrawal Title: Investor Sentiment and Short-Term Returns for Size-Adjusted Value and Growth Portfolios Abstract: We examine the sentiment levels of individual investors relative to subsequent short-term market returns for 1992–2010. We find that sentiment, proxied by percentage of investors who are “bullish” on the market, is significantly negatively related to the subsequent three- and six-month performance of the market. The negative relationship is consistent with the contrarian notion of sentiment. In other words, high (low) levels of bullishness tend to be followed by subsequent low (high) returns. This is true even with the inclusion of standard control explanatory variables (Fama-French [1993]). While the significant results hold for the overall market, they are clearly driven by growth, rather than value stocks. Contrary to some earlier studies, we also note significant explanatory power for sentiment when looking at returns of small-, mid-, and large-cap growth stocks. We also noted that the long-term moving average of monthly bullishness increased from 33.3% to 39.0% over the last 18 years. In our study period, about 5% of the total sentiment observations are above 56% (very bullish) and about 5% are below 27% (quite bearish). Finally, we find some strength in the lagged autocorrelation structure for the sentiment variable that lasts for just about three to nine months. Journal: Journal of Behavioral Finance Pages: 81-93 Issue: 1 Volume: 16 Year: 2015 Month: 1 X-DOI: 10.1080/15427560.2015.1000329 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1000329 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:1:p:81-93 Template-Type: ReDIF-Article 1.0 Author-Name: Arvid O. I. Hoffmann Author-X-Name-First: Arvid O. I. Author-X-Name-Last: Hoffmann Author-Name: Thomas Post Author-X-Name-First: Thomas Author-X-Name-Last: Post Author-Name: Joost M. E. Pennings Author-X-Name-First: Joost M. E. Author-X-Name-Last: Pennings Title: How Investor Perceptions Drive Actual Trading and Risk-Taking Behavior Abstract: Recent work in behavioral finance showed how investors' perceptions (i.e., return expectations, risk tolerance, and risk perception) affect hypothetical trading and risk-taking behavior. However, are such perceptions also capable of explaining actual trading and risk-taking behavior? To answer this question, we combine monthly survey data with matching brokerage records to construct a panel dataset allowing us to simultaneously examine investor perceptions and behavior. We find that investor perceptions and changes therein are important drivers of actual trading and risk-taking behavior: Investors with higher levels of and upward revisions of return expectations are more likely to trade, have higher turnover, trade larger amounts per transaction, and use derivatives. Investors with higher levels of and upward revisions in risk tolerance are more likely to trade, have higher buy-sell ratios, use limit orders more frequently, and hold riskier portfolios. Investors with higher levels of risk perception are more likely to trade, have higher turnover, have lower buy-sell ratios, and hold riskier portfolios. Journal: Journal of Behavioral Finance Pages: 94-103 Issue: 1 Volume: 16 Year: 2015 Month: 1 X-DOI: 10.1080/15427560.2015.1000332 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1000332 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:1:p:94-103 Template-Type: ReDIF-Article 1.0 Author-Name: Lee A. Smales Author-X-Name-First: Lee A. Author-X-Name-Last: Smales Title: Trading Behavior and Monetary Policy News Abstract: The author examines the patterns of trading behavior in the period surrounding monetary policy announcements. Utilizing a high-frequency dataset, with broker identifiers enabling classification of trades executed through institutional and retail brokers, the author investigates all trades submitted on the Australian Securities Exchange over the period of December 2007 to December 2014. The author identifies a rapid, asymmetric, price adjustment to the announcement, which is larger when the target rate decision results in lower-than-expected rates, and is accompanied by a sharp increase in market activity. Institutional brokers tend to execute trades more quickly following the announcement, and target more liquid large-cap stocks. Trades executed through institutional brokers appear to be more profitable, although profits are concentrated in buy trades. The evidence supports the notion that institutional investors have an advantage in processing the news resulting from target rate decisions. Journal: Journal of Behavioral Finance Pages: 365-380 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1405007 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1405007 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:365-380 Template-Type: ReDIF-Article 1.0 Author-Name: Keith Duncan Author-X-Name-First: Keith Author-X-Name-Last: Duncan Author-Name: Tim Hasso Author-X-Name-First: Tim Author-X-Name-Last: Hasso Title: Family Governance Signals and Heterogeneous Preferences of Investors Abstract: The authors explore if investors use signals of founding family governance (ownership, involvement in management, board representation) when making investment choices in an experimental setting. The authors link the literature on heterogeneous preferences of investors to signaling theory, and apply it in the context of founding family governance by exploring the presence of investor clusters with varying utility functions with respect to founding family governance. The authors show that nonprofessional investors use these signals in their investment choices. Latent class analysis identifies 3 distinct clusters within our sample that have conflicting utility curves with respect to founding family governance. Journal: Journal of Behavioral Finance Pages: 381-395 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1405267 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1405267 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:381-395 Template-Type: ReDIF-Article 1.0 Author-Name: Nicholas Mangee Author-X-Name-First: Nicholas Author-X-Name-Last: Mangee Title: Stock Returns and the Tone of Marketplace Information: Does Context Matter? Abstract: The author provides empirical evidence that marketplace context matters for understanding stock price behavior. Investor sentiment, as measured by the informational tone of stock market reports from the Wall Street Journal and Bloomberg News outlets, is compared across 2 classification dictionaries: the Harvard General Inquirer IV-4 dictionary and the financial context-specific dictionary of Loughran and McDonald [2011]. Empirical analyses find a negative relationship between measures of investor pessimism and real stock returns. However, this relationship is strongest and statistically significant only for the context-specific measures. The results suggest that investor sentiment based on contextualized information is able to explain medium- to longer-term swings in aggregate stock prices. This, in turn, implies that investor interpretation of stock market information may not unfold in mechanical ways. Journal: Journal of Behavioral Finance Pages: 396-406 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1405268 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1405268 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:396-406 Template-Type: ReDIF-Article 1.0 Author-Name: Philippe Grégoire Author-X-Name-First: Philippe Author-X-Name-Last: Grégoire Author-Name: Jonathan Coupland Author-X-Name-First: Jonathan Author-X-Name-Last: Coupland Title: Informed and Uninformed Trading With Correlated Assets: An Experimental Study Abstract: The authors examine the use of market and limit orders by informed and uninformed traders in an experimental market with 2 correlated assets. Some traders receive private information about one asset, referred to as the main asset, which also conveys information about the value of another asset, referred to as the substitute. A continuous flow of information allows uninformed traders to form expectations about the liquidation value of each asset. The authors find that insiders submit more market and limit orders than uninformed traders do, and that they are more attracted toward the high-volatility asset, which is the substitute. Moreover, insiders make more money with the substitute than with the main asset, and realize their biggest gains when insider trading is prohibited in the main asset. The results also suggest the use of manipulation strategies by insiders. Journal: Journal of Behavioral Finance Pages: 407-420 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1406941 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1406941 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:407-420 Template-Type: ReDIF-Article 1.0 Author-Name: Chris Meier Author-X-Name-First: Chris Author-X-Name-Last: Meier Title: Aggregate Investor Confidence in the Stock Market Abstract: Overconfidence is one of the most robust findings in the field of behavioral finance, and is associated with excessive trading and risk taking among market participants. Assessment of the level of confidence of individuals in their abilities and skills is well documented. However, the literature lacks an aggregate measure of investor confidence, with this required to test its implications on a macro level. The author introduces a simple measure of aggregate investor confidence by adopting a formal model of overconfidence. The applications of the measure suggest that, in aggregate, higher trading activity occurs when investor confidence soars, particularly for smaller stocks. Subsequently, the effect partially reverses, implying a correction to an initial overreaction. The newly introduced investor confidence index possesses better ability to predict trading activity than past returns, as used in prior studies. Additionally, investors tend to have a higher risk appetite when confident, as shown by increased investment in small stocks with higher risk. Journal: Journal of Behavioral Finance Pages: 421-433 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1406942 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1406942 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:421-433 Template-Type: ReDIF-Article 1.0 Author-Name: David Blanchett Author-X-Name-First: David Author-X-Name-Last: Blanchett Author-Name: Michael Finke Author-X-Name-First: Michael Author-X-Name-Last: Finke Author-Name: Michael Guillemette Author-X-Name-First: Michael Author-X-Name-Last: Guillemette Title: The Effect of Advanced Age and Equity Values on Risk Preferences Abstract: The authors analyze the effect equity values and age have on the risk aversion of participants in U.S.-defined contribution plans using a unique dataset with daily responses to a risk tolerance questionnaire. They find that older investors are more risk averse compared with younger cohorts when controlling for the level of the S&P 500 Index, account balance, income, savings percentage, equity percentage and allocation fund percentage. They also find that risk preferences are influenced by the level of the S&P 500, but only in advanced age. This finding is consistent with decreasing absolute risk aversion when wealth is proxied by the S&P 500 Index. Journal: Journal of Behavioral Finance Pages: 434-441 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1431884 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1431884 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:434-441 Template-Type: ReDIF-Article 1.0 Author-Name: Nicholas Apergis Author-X-Name-First: Nicholas Author-X-Name-Last: Apergis Author-Name: Mobeen Ur Rehman Author-X-Name-First: Mobeen Ur Author-X-Name-Last: Rehman Title: Is CAPM a Behavioral Model? Estimating Sentiments from Rationalism Abstract: The authors investigate the role of investor sentiment in asset pricing. In particular, they explore whether this investor sentiment has the ability to be predicted by the residuals from the capital asset pricing model (CAPM). The analysis makes use of data for S&P500 firms on a daily basis, spanning the period of 1995–2015, as well as certain panel methodological approaches. The results suggest that the residuals from the CAPM model gain explanatory power for investor sentiment. In other words, investor sentiment is a priced factor. The implication of this finding is that overlooking the role of investor sentiment in classical finance theory could lead to an imperfect picture of describing the asset pricing. Journal: Journal of Behavioral Finance Pages: 442-449 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1431885 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1431885 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:442-449 Template-Type: ReDIF-Article 1.0 Author-Name: A. Seddik Meziani Author-X-Name-First: A. Seddik Author-X-Name-Last: Meziani Author-Name: Elliot Noma Author-X-Name-First: Elliot Author-X-Name-Last: Noma Title: A New Method of Measuring Financial Risk Aversion Using Hypothetical Investment Preferences: What Does It Say in the Case of Gender Differences? Abstract: Aversion to risk is one of the main factors driving investment decisions. Studies have been based on either simple decisions in a laboratory setting or real-life decisions viewed in retrospect. The study's main contribution to the literature consists of a new and elaborate method of measuring risk combined with a real-world investment task brought into a laboratory setting and show that in this controlled environment on average women are more risk averse than men. Unlike previous studies, the authors measure risk tolerance in units that naturally map into the risk-return space used by investors, giving them the missing tool to identify the optimal portfolio among the set of investment options that comprise the efficient frontier. Journal: Journal of Behavioral Finance Pages: 450-461 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1431888 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1431888 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:450-461 Template-Type: ReDIF-Article 1.0 Author-Name: L. Mick Swartz Author-X-Name-First: L. Mick Author-X-Name-Last: Swartz Author-Name: Farrokh Emami-Langroodi Author-X-Name-First: Farrokh Author-X-Name-Last: Emami-Langroodi Title: Relative Value Hedge Funds: A Behavioral Modeling of Hedge Fund Risk and Return Factors Abstract: This study has 4 contributions to the literature. First, the authors analyze the risk characteristics for 11 Relative Value hedge fund strategies. Second, the authors introduce 3 families of behavioral factors, the D family, the L family, and the R family. In contrast to previous hedge fund studies, these new factors assume investors use historical and behavioral data such as average drawdown, run up, and liquidity from each hedge fund category to assess the risk. Third, additional macroeconomic variables, such as the CRB, Copper, and Oil are found to be statistically significant in some strategies. This economic and historical information, when included with asset pricing models, is more powerful in explaining hedge fund returns than previous models. Fourth, unlike the previous literature, these generated models are corrected for time-series assumptions violations and heteroskedasticity. To more fully understand the timing of risks and returns associated with investing in relative value hedge funds, pension funds and other investors should incorporate more economic factors and behavioral factors. Journal: Journal of Behavioral Finance Pages: 462-482 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1434654 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1434654 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:462-482 Template-Type: ReDIF-Article 1.0 Author-Name: Gerasimos G. Rompotis Author-X-Name-First: Gerasimos G. Author-X-Name-Last: Rompotis Title: Herding Behavior among Exchange-Traded Funds Abstract: The author examines whether the trading behavior of exchange-traded funds (ETFs) is biased by any herding effect. Return data of a sample of 66 and 34 large-cap and small-cap ETFs, respectively, are used over the period 2012–2016 to assess whether these funds herd and whether herding is more pronounced during extreme markets, during down markets, and during days with extreme trading activity and volatility. The results show that herding is not the case for ETFs. However, some evidence is obtained on a decreasing return dispersion among ETFs on days with negative market returns. Trading activity seems not to induce herding. On the contrary, the author obtains evidence that shows that the higher the trading volumes are, the higher the return dispersion among ETFs is. When it comes to herding during highly volatile markets, the author finds that return dispersion among ETFs decreases on days with extremely high intraday volatility. However, when assessing the relationship between return dispersion and volatility without focusing on days with extremely high risk, the author obtains strong evidence of a linear relation between the 2 variables. This contradicting finding suggests that the stronger the intraday volatility in the ETF market is, the wider the dispersion in returns among ETFs is. Journal: Journal of Behavioral Finance Pages: 483-497 Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1431886 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1431886 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:483-497 Template-Type: ReDIF-Article 1.0 Author-Name: The Editors Title: Editorial Board EOV Journal: Journal of Behavioral Finance Pages: ebi-ebi Issue: 4 Volume: 19 Year: 2018 Month: 10 X-DOI: 10.1080/15427560.2018.1483643 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1483643 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:ebi-ebi Template-Type: ReDIF-Article 1.0 Author-Name: Sina Wulfmeyer Author-X-Name-First: Sina Author-X-Name-Last: Wulfmeyer Title: Irrational Mutual Fund Managers: Explaining Differences in Their Behavior Abstract: Documenting the disposition effect for a large sample of mutual fund managers in the United States, we find that stock-level characteristics explain the cross-sectional variation of the effect. The disposition effect, which is the tendency to sell winner stocks too early and hold on to loser stocks for too long, is more pronounced for fund managers who invest in stocks that are more difficult to value. Using different measures of stock and market uncertainty, we show that mutual fund managers display a stronger disposition-driven behavior when stocks are more difficult to value. We also find that the level of the disposition effect is monotonically increasing with the level of systematic risk (i.e., beta). In addition, we document that the trading behavior of mutual fund managers is partly driven by attention-grabbing stocks (dividend-paying stocks). Overall, our results suggest that stock-level uncertainty and trading of attention-grabbing stocks amplify the disposition effect and that differences in the effect can be explained by mutual fund managers' investment styles. Given that mutual funds hold a large fraction of the U.S. equity market, our findings add to the ongoing discussion whether professional investors can create stock mispricings and shed new light on market efficiency. Journal: Journal of Behavioral Finance Pages: 99-123 Issue: 2 Volume: 17 Year: 2016 Month: 4 X-DOI: 10.1080/15427560.2016.1133621 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1133621 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:2:p:99-123 Template-Type: ReDIF-Article 1.0 Author-Name: Bong-Soo Lee Author-X-Name-First: Bong-Soo Author-X-Name-Last: Lee Author-Name: Leon Li Author-X-Name-First: Leon Author-X-Name-Last: Li Title: The Idiosyncratic Risk-Return Relation: A Quantile Regression Approach Based on the Prospect Theory Abstract: Given some debate on the empirical idiosyncratic risk-return relation in the literature, we reexamine the relation using a quantile regression approach based on the prospect theory developed by Kahneman and Tversky [1979]. The quantile regression approach allows the coefficient on the independent variable (idiosyncratic risk) to vary across the distribution of the dependent variable (return). Our sample consists of stocks traded on the NYSE, AMEX, and NASDAQ during 1980–2010: 80,324 firm-year observations and 8,123 firms in total. The quantile regression results show that idiosyncratic risk is positively (negatively) related to returns at the high (low) quantiles of returns. The findings are consistent with the prospect theory that investors have a tendency to be less (more) willing to gamble with profits (losses). The results also demonstrate that the least-squares and least-sum optimization methods commonly used in prior research do not capture the relations between idiosyncratic risk and returns at the tail parts of the distribution of returns. Therefore, our empirical results provide new insights into the idiosyncratic risk-return relation in the literature. Journal: Journal of Behavioral Finance Pages: 124-143 Issue: 2 Volume: 17 Year: 2016 Month: 4 X-DOI: 10.1080/15427560.2016.1133624 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1133624 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:2:p:124-143 Template-Type: ReDIF-Article 1.0 Author-Name: Mercedes Alda Author-X-Name-First: Mercedes Author-X-Name-Last: Alda Author-Name: Luis Ferruz Author-X-Name-First: Luis Author-X-Name-Last: Ferruz Title: Pension Fund Herding and the Influence of Management Style Abstract: In this article, we study the herding phenomenon in Spanish equity pension funds with European investment locations from 2002 to 2012, considering whether the development of different investment strategies by the managers results in herding. In addition, we analyze the performance-herding relationship, observing whether pension fund performance decreases or increases when pension funds herd. Using the herding measure of Lakonishok et al. [1992], we do not find strong imitation behavior, although herding in the market and book-to-market styles are higher. Those pension funds that do not herd or that follow distinctive strategies do not present significant differences in performance with respect to herding funds. Journal: Journal of Behavioral Finance Pages: 144-156 Issue: 2 Volume: 17 Year: 2016 Month: 4 X-DOI: 10.1080/15427560.2016.1133625 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1133625 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:2:p:144-156 Template-Type: ReDIF-Article 1.0 Author-Name: María José Muñoz Torrecillas Author-X-Name-First: María José Author-X-Name-Last: Muñoz Torrecillas Author-Name: Rossitsa Yalamova Author-X-Name-First: Rossitsa Author-X-Name-Last: Yalamova Author-Name: Bill McKelvey Author-X-Name-First: Bill Author-X-Name-Last: McKelvey Title: Identifying the Transition from Efficient-Market to Herding Behavior: Using a Method from Econophysics Abstract: We test whether “detrended fluctuation analysis” (DFA)—an econophysics method—identifies the transition from efficient-market trading to herding behavior and the rise of the NASDAQ dot.com stock market bubble. DFA divides a time series into “segments” of varying lengths and then tests whether power-law distributions exist within the segments. A power-law distribution of stock-price changes within a segment indicates herding behavior and the start of the dot.com bubble. The clarity of the transition indication depends on both segment lengths and segment starting dates. Our findings show that DFA can be used to identify the beginning of stock-market bubbles but not the beginning of crashes. Journal: Journal of Behavioral Finance Pages: 157-182 Issue: 2 Volume: 17 Year: 2016 Month: 4 X-DOI: 10.1080/15427560.2016.1170680 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1170680 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:2:p:157-182 Template-Type: ReDIF-Article 1.0 Author-Name: Cristina Del Rio Author-X-Name-First: Cristina Del Author-X-Name-Last: Rio Author-Name: Rafael Santamaria Author-X-Name-First: Rafael Author-X-Name-Last: Santamaria Title: Stock Characteristics, Investor Type, and Market Myopia Abstract: This paper investigates the role of stock characteristics and investor type in market myopia. Using the Generalized Method of Moments (GMM) to control for endogeneity, we obtain evidence indicating that market myopia is greater among stocks that are relatively hard-to-value and hard-to-arbitrage, and find this conclusion to be robust to the choice of proxy for these characteristics. We also obtain a significantly negative relationship between institutional ownership and market myopia, due to the former acting as informed traders who exploit mispricing created by individual traders. It is important to note that the impact of their role becomes significant only when they have a sizeable share in firm ownership, as is the case of UK mutual funds and pension funds and Spanish banks. Journal: Journal of Behavioral Finance Pages: 183-199 Issue: 2 Volume: 17 Year: 2016 Month: 4 X-DOI: 10.1080/15427560.2016.1170682 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1170682 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:2:p:183-199 Template-Type: ReDIF-Article 1.0 Author-Name: Mario J. Maletta Author-X-Name-First: Mario J. Author-X-Name-Last: Maletta Author-Name: Yue Zhang Author-X-Name-First: Yue Author-X-Name-Last: Zhang Title: The Effects of Earnings Guidance on Investors’ Perceptions of Firm Credibility in a Two-Firm Setting Abstract: This study investigates how a peer firm's earnings guidance affects investors' credibility assessments of a target firm. Results suggest that when both a target firm and a peer firm provide earnings guidance, contrast effects occur such that the more accurate the earnings guidance of the target firm relative to the peer, the greater are investors' credibility assessments for the target. However, such contrast effect diminishes as the target firm's earnings guidance becomes more accurate. On the contrary, when a peer provides earnings guidance but the target firm does not, assimilation effects as opposed to contrast effects dominate investors' credibility judgments. Journal: Journal of Behavioral Finance Pages: 277-286 Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.968717 File-URL: http://hdl.handle.net/10.1080/15427560.2014.968717 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:277-286 Template-Type: ReDIF-Article 1.0 Author-Name: Matthias W. Uhl Author-X-Name-First: Matthias W. Author-X-Name-Last: Uhl Title: Reuters Sentiment and Stock Returns Abstract: Sentiment from more than 3.6 million Reuters news articles is tested in a vector autoregression model framework on its ability to forecast returns of the Dow Jones Industrial Average stock index. We show that Reuters sentiment can explain and predict changes in stock returns better than macroeconomic factors. We further find that negative Reuters sentiment has more predictive power than positive Reuters sentiment. Trading strategies with Reuters sentiment achieve significant outperformance with high success rates as well as high Sharpe ratios. Journal: Journal of Behavioral Finance Pages: 287-298 Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.967852 File-URL: http://hdl.handle.net/10.1080/15427560.2014.967852 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:287-298 Template-Type: ReDIF-Article 1.0 Author-Name: Kimberly F. Luchtenberg Author-X-Name-First: Kimberly F. Author-X-Name-Last: Luchtenberg Author-Name: Michael J. Seiler Author-X-Name-First: Michael J. Author-X-Name-Last: Seiler Title: Do Institutional and Individual Investors Differ in Their Preference for Financial Skewness? Abstract: Employing a unique sample of individual and institutional investors, we conduct experiments to determine investors’ preference for (or indifference to) financial skewness. We present investors with a series of stocks with varying levels of skewness. Using Instant Response Devices, we then collect investors’ choices to hold or sell each stock. Among stocks with equal expected returns, we find strong evidence that the sample investors use a prospect theory utility function rather than a mean-variance expected utility function to decide to sell or hold stocks. In the loss domain, we find that investors are ambivalent about the choice between positively and negatively skewed stocks. However, in the gain domain, we find that both individual and institutional investors prefer negatively skewed stocks—a contrast from previous research suggesting that individuals (and not institutional investors) prefer positive skewness. We also find evidence suggesting that reference points are important in financial decision making. Journal: Journal of Behavioral Finance Pages: 299-311 Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.968718 File-URL: http://hdl.handle.net/10.1080/15427560.2014.968718 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:299-311 Template-Type: ReDIF-Article 1.0 Author-Name: Cetin Ciner Author-X-Name-First: Cetin Author-X-Name-Last: Ciner Title: The Time Varying Relation Between Consumer Confidence and Equities Abstract: We examine the impact of changes in consumer confidence measures on future stock index returns. Our analysis is built on the growing understanding that investor sentiment is an important factor in the stock market. By using frequency dependent regression methods, we show that there is a time-varying relation between consumer confidence and stock returns. Higher levels of consumer confidence imply greater returns in the short term but negative returns in the medium term. However, this effect is only observed for the small firm index. Moreover, there is evidence to suggest that consumer confidence is significantly affected by stock returns in reverse causality. Journal: Journal of Behavioral Finance Pages: 312-317 Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.968716 File-URL: http://hdl.handle.net/10.1080/15427560.2014.968716 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:312-317 Template-Type: ReDIF-Article 1.0 Author-Name: Paresh Kumar Narayan Author-X-Name-First: Paresh Kumar Author-X-Name-Last: Narayan Author-Name: Seema Narayan Author-X-Name-First: Seema Author-X-Name-Last: Narayan Title: Psychological Oil Price Barrier and Firm Returns Abstract: In this paper, we investigate the psychological barrier effect induced by the oil price on firm returns when the oil price reaches US$100 or more per barrel. We find evidence of the negative effect of the US$100 oil price barrier for: (a) the entire sample of 1559 firms listed on the American stock exchanges; (b) both foreign and domestic firms, with domestic firms significantly more affected; (c) the 10 different sizes of firms, with the smaller firms less affected compared to the larger firms; and (d) 17 sectors of firms, with firms in the utilities, mining, and administration sectors being the least affected. Journal: Journal of Behavioral Finance Pages: 318-333 Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.968719 File-URL: http://hdl.handle.net/10.1080/15427560.2014.968719 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:318-333 Template-Type: ReDIF-Article 1.0 Author-Name: Mike Cudd Author-X-Name-First: Mike Author-X-Name-Last: Cudd Author-Name: Marcelo Eduardo Author-X-Name-First: Marcelo Author-X-Name-Last: Eduardo Author-Name: Lloyd Roberts Author-X-Name-First: Lloyd Author-X-Name-Last: Roberts Title: The Credit Crisis and De Nova Mimicking in Security Analysis Abstract: The failure of the investment community in 2007 to foresee the systematic collapse of the credit default swap market significantly increased the complexity of security analysis and damaged the reputation of the security analyst community in general. submit that in response to the credit crisis, security analysts may have engaged in a de nova form of mimicking by increasing emphasis on general market factors and reducing emphasis on idiosyncratic factors in their valuations, driven by behavioral motives to achieve increased cost efficiency and avoid higher penalties for unfavorable outlier valuations. The result would be increased correlation among security valuations and therefore returns, and diminished benefits of diversification. We test this hypothesis by examining the patterns of security and portfolio returns surrounding the onset of the credit crisis in early 2007 and observe a significant postcrisis increase in the proportion of security and portfolio returns explained by market factors. The findings support the hypothesized shift in emphasis in security analyst valuation techniques, and provide results consistent with the hypothesized behavioral explanations. Journal: Journal of Behavioral Finance Pages: 334-340 Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.968721 File-URL: http://hdl.handle.net/10.1080/15427560.2014.968721 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:334-340 Template-Type: ReDIF-Article 1.0 Author-Name: Teresa Corzo Author-X-Name-First: Teresa Author-X-Name-Last: Corzo Author-Name: Margarita Prat Author-X-Name-First: Margarita Author-X-Name-Last: Prat Author-Name: Esther Vaquero Author-X-Name-First: Esther Author-X-Name-Last: Vaquero Title: Behavioral Finance in Joseph de la Vega's Confusion de Confusiones Abstract: In this paper, we link Joseph de la Vega's work Confusion de Confusiones, written in 1688, with current behavioral finance and propose that Vega be considered the first precursor of modern behavioral finance. In addition to describing excessive trading, overreaction and underreaction, and the disposition effect, Vega vividly portrays how investors behaved 300 years ago and includes interesting documentation on investor biases, such as herding, overconfidence, and regret aversion. Journal: Journal of Behavioral Finance Pages: 341-350 Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.968722 File-URL: http://hdl.handle.net/10.1080/15427560.2014.968722 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:341-350 Template-Type: ReDIF-Article 1.0 Author-Name: Christian Pierdzioch Author-X-Name-First: Christian Author-X-Name-Last: Pierdzioch Author-Name: Jan-Christoph Rülke Author-X-Name-First: Jan-Christoph Author-X-Name-Last: Rülke Title: On the Internal Consistency of Stock Market Forecasts Abstract: Using the Livingston survey data, we test internal consistency restrictions on short-term, medium-term, and long-term stock market forecasts of the S&P 500®. We find that neither short-term forecasts are consistent with medium-term forecasts nor that medium-term forecasts are consistent with long-term forecasts. Using a forecast formation process featuring a distributed lag structure, however, we find some weak evidence of internal inconsistency of medium-term forecasts with long-term forecasts. Journal: Journal of Behavioral Finance Pages: 351-359 Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.968720 File-URL: http://hdl.handle.net/10.1080/15427560.2014.968720 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:351-359 Template-Type: ReDIF-Article 1.0 Author-Name: The Editors Title: Editorial Board Page: EoV Journal: Journal of Behavioral Finance Pages: ebi-ebi Issue: 4 Volume: 15 Year: 2014 Month: 10 X-DOI: 10.1080/15427560.2014.979663 File-URL: http://hdl.handle.net/10.1080/15427560.2014.979663 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:4:p:ebi-ebi Template-Type: ReDIF-Article 1.0 Author-Name: Jussi Nikkinen Author-X-Name-First: Jussi Author-X-Name-Last: Nikkinen Author-Name: Jarkko Peltomäki Author-X-Name-First: Jarkko Author-X-Name-Last: Peltomäki Title: Crash Fears and Stock Market Effects: Evidence From Web Searches and Printed News Articles Abstract: The authors studied the complex relationship between information supply and demand using newspaper articles and web searches that reflect investors’ crash fears. They report that more web searches lead to more news, whereas more news does not have that effect on web search in the future. The authors show also that web searches have an immediate effect on stock market returns and the VIX implied volatility, whereas the effect of news articles lasts longer, up to 11 weeks. The results suggest collectively that the web searches related to market crashes lead both the printed news stories about market crashes. Journal: Journal of Behavioral Finance Pages: 117-127 Issue: 2 Volume: 21 Year: 2020 Month: 4 X-DOI: 10.1080/15427560.2019.1630125 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1630125 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:2:p:117-127 Template-Type: ReDIF-Article 1.0 Author-Name: Jan Viebig Author-X-Name-First: Jan Author-X-Name-Last: Viebig Title: Exuberance in Financial Markets: Evidence from Machine Learning Algorithms Abstract: Motivated by Campbell and Shiller (1998), we show that the probability that abnormally low returns over long-term investment horizons occur in the future is disproportionately high when equity markets trade at extremely high valuation levels. Support vector machines are able to learn “clustering patterns” from fundamental data with high precision rates. Decision boundaries calculated with machine learning algorithms can help investors to detect irrational exuberance in financial markets followed by abnormally low returns. Journal: Journal of Behavioral Finance Pages: 128-135 Issue: 2 Volume: 21 Year: 2020 Month: 4 X-DOI: 10.1080/15427560.2019.1663849 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1663849 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:2:p:128-135 Template-Type: ReDIF-Article 1.0 Author-Name: Lucy F. Ackert Author-X-Name-First: Lucy F. Author-X-Name-Last: Ackert Author-Name: Richard Deaves Author-X-Name-First: Richard Author-X-Name-Last: Deaves Author-Name: Jennifer Miele Author-X-Name-First: Jennifer Author-X-Name-Last: Miele Author-Name: Quang Nguyen Author-X-Name-First: Quang Author-X-Name-Last: Nguyen Title: Are Time Preference and Risk Preference Associated with Cognitive Intelligence and Emotional Intelligence? Abstract: The authors investigated whether cognitive intelligence (intelligence quotient [IQ]) and emotional intelligence (emotional quotient [EQ]) meaningfully correlate with time preference and risk preference, finding solid evidence in support. In the realm of time preference, high-EQ individuals are less subject to present (or future) bias and more patient. Further, high-IQ subjects tend to exhibit preferences that conform to expected utility maximization. While recent research on the relationship between cognitive ability and preferences has provided important insights, the results suggest that both cognitive intelligence and emotional intelligence matter. Journal: Journal of Behavioral Finance Pages: 136-156 Issue: 2 Volume: 21 Year: 2020 Month: 4 X-DOI: 10.1080/15427560.2019.1663850 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1663850 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:2:p:136-156 Template-Type: ReDIF-Article 1.0 Author-Name: François Desmoulins-Lebeault Author-X-Name-First: François Author-X-Name-Last: Desmoulins-Lebeault Author-Name: Luc Meunier Author-X-Name-First: Luc Author-X-Name-Last: Meunier Author-Name: Sima Ohadi Author-X-Name-First: Sima Author-X-Name-Last: Ohadi Title: Does Implied Volatility Pricing Follow the Tenets of Prospect Theory? Abstract: Prospect theory and behavioral finance are gaining recognition as useful frameworks for the analysis of economic behaviors. Yet, behavioral finance is generally concerned with specific anomalies and individual behaviors and does not deal with market indices. To bridge this gap, the authors studied the changes in the value of implied volatility indices on several markets, relative to changes in the level of the corresponding equity indices with dividends reinvestment. We hypothesized that the relation should follow the psychological tenets of prospect theory. In accordance with this hypothesis, the authors found concavity in the gain area, convexity in the loss area, and evidence that market losses have more impact than gains on the pricing of implied volatility indices. These findings are observed in all the markets under consideration and are robust to the use of different functional forms. The parameters are in the range observed in previous laboratory studies but vary in different trading environments. Journal: Journal of Behavioral Finance Pages: 157-173 Issue: 2 Volume: 21 Year: 2020 Month: 4 X-DOI: 10.1080/15427560.2019.1663851 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1663851 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:2:p:157-173 Template-Type: ReDIF-Article 1.0 Author-Name: Tao Chen Author-X-Name-First: Tao Author-X-Name-Last: Chen Title: Country herding in the global market Abstract: Using the tick-by-tick transaction data for 41 stock markets, the authors examine whether investors follow each other into and out of the same countries, dubbed country herding. Empirical evidence is sought to substantiate the existence of country herding in international markets regardless of retail and institutional investors. Additional tests suggest that country herding is not simply a reflection of stock herding, industry herding, and market co-movements. Finally, the findings demonstrate that country herding may be partly driven by investigative herding, market stresses, and investor sentiments. Journal: Journal of Behavioral Finance Pages: 174-185 Issue: 2 Volume: 21 Year: 2020 Month: 4 X-DOI: 10.1080/15427560.2019.1663852 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1663852 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:2:p:174-185 Template-Type: ReDIF-Article 1.0 Author-Name: Kristina Rennekamp Author-X-Name-First: Kristina Author-X-Name-Last: Rennekamp Author-Name: Kathy Rupar Author-X-Name-First: Kathy Author-X-Name-Last: Rupar Author-Name: Nicholas Seybert Author-X-Name-First: Nicholas Author-X-Name-Last: Seybert Title: Short Selling Pressure, Reporting Transparency, and the Use of Real and Accruals Earnings Management to Meet Benchmarks Abstract: Prior literature finds that short selling is beneficial to the market because it increases liquidity and helps to discipline optimistic market prices. The authors use 2 controlled experiments to examine the potential for an unintended consequence of allowing short selling or easing short selling restrictions. Because prior research identifies short sellers as sophisticated market participants who have the ability to see through accrual earnings management choices, we predict and find that, when reporting is transparent, managers are more likely to use real earnings management relative to accrual earnings management when short selling restrictions are relaxed. This is consistent with the idea that real earnings management activities are more defensible as the result of legitimate operating decisions and are therefore more likely to hold up to scrutiny from short sellers. Overall, the results suggest that regulations that are unrelated to financial reporting can affect how managers respond to the transparency that arises from financial reporting regulations. Journal: Journal of Behavioral Finance Pages: 186-204 Issue: 2 Volume: 21 Year: 2020 Month: 4 X-DOI: 10.1080/15427560.2019.1663853 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1663853 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:2:p:186-204 Template-Type: ReDIF-Article 1.0 Author-Name: Florian Weißofner Author-X-Name-First: Florian Author-X-Name-Last: Weißofner Author-Name: Ulrich Wessels Author-X-Name-First: Ulrich Author-X-Name-Last: Wessels Title: Overnight Returns: An International Sentiment Measure Abstract: The suitability of overnight returns as a firm-specific investor sentiment measure, previously found in the United States, is similarly present in international equity markets. This delivers a completely novel approach to measure investor sentiment at the firm level. For applicability reasons overnight returns have to fulfill 3 characteristics that would be expected of a sentiment measure. First, overnight returns persist in the short run; second, this persistence is stronger among harder-to-value firms; and third, stocks with high overnight returns underperform in the long run. Implementing this novel sentiment measure on a common anomaly, the authors find explanatory power even beyond a market-wide sentiment measure. Journal: Journal of Behavioral Finance Pages: 205-217 Issue: 2 Volume: 21 Year: 2020 Month: 4 X-DOI: 10.1080/15427560.2019.1663855 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1663855 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:2:p:205-217 Template-Type: ReDIF-Article 1.0 Author-Name: Saptarshi Mukherjee Author-X-Name-First: Saptarshi Author-X-Name-Last: Mukherjee Author-Name: Sankar De Author-X-Name-First: Sankar Author-X-Name-Last: De Title: When Are Investors Rational? Abstract: Taking our cue from certain recent advances in experimental psychology, the authors propose a plausible theory of conflict between rationality and inherent behavioral biases of investors. In this theory no investor is fully rational or fully behavioral at all times. An investor faces a continuum between behavioral and rational positions. A movement toward rationality is a choice; it is costly to be fully rational which requires serious mental calculations. On the other hand, there could be some benefits to rationality in special circumstances that compensate for the costs. Using a unique and extensive investor-level database, the authors show that the degree of nonrationality decreases as rational behavior becomes more attractive. In the empirical setting, the proxy for rational behavior is investor's use of private predisclosure information during earnings announcement periods, while the disposition effect they display serves as an estimate of their behavioral bias. The paper contributes to the existing literature in several dimensions. Journal: Journal of Behavioral Finance Pages: 1-18 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1443936 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1443936 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:1-18 Template-Type: ReDIF-Article 1.0 Author-Name: Benjamin M. Blau Author-X-Name-First: Benjamin M. Author-X-Name-Last: Blau Title: Price Clustering and Investor Sentiment Abstract: Among the anomalous findings in the finance literature, perhaps the most persistent is the finding that security prices tend to cluster on round pricing increments. The author examines how investor sentiment influences the degree of price clustering. Both univariate and multivariate tests show a contemporaneous correlation between price clustering and investor sentiment. Recognizing the need to make stronger causal inferences, the author conducts 2 additional sets of tests. First, the author uses the technology bubble period as natural experiment and examine the price clustering of technology vis-à-vis nontechnology stocks. Results show that price clustering is markedly higher in tech stocks than in nontech stocks during this period of rising, sector-specific, investor sentiment. Second, the author estimates a vector autoregression process and examines the impulse responses of price clustering to exogenous shocks in investor sentiment. The results from these tests indicate that causation flows from sentiment to clustering instead of the other way around. Journal: Journal of Behavioral Finance Pages: 19-30 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1431887 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1431887 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:19-30 Template-Type: ReDIF-Article 1.0 Author-Name: Nina Gotthelf Author-X-Name-First: Nina Author-X-Name-Last: Gotthelf Author-Name: Matthias W. Uhl Author-X-Name-First: Matthias W. Author-X-Name-Last: Uhl Title: News Sentiment: A New Yield Curve Factor Abstract: The authors show that sentiments from newspaper articles can explain and predict movements in the term structure of U.S. government bonds. This effect is stronger at the short end of the curve, coinciding with greater volatility and investors' need to continually reassess the Fed's reaction function. Facing such uncertainty, market participants rely on news and sentiment as a central element in their decision-making process. Considering this dependence, the authors propose a new yield curve factor—news sentiment—that is distinct from the 3 established yield curve factors (level, slope, and curvature) as well as from fundamental macroeconomic variables. Journal: Journal of Behavioral Finance Pages: 31-41 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1432620 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1432620 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:31-41 Template-Type: ReDIF-Article 1.0 Author-Name: Sarah Asebedo Author-X-Name-First: Sarah Author-X-Name-Last: Asebedo Author-Name: Patrick Payne Author-X-Name-First: Patrick Author-X-Name-Last: Payne Title: Market Volatility and Financial Satisfaction: The Role of Financial Self-Efficacy Abstract: This study investigates the role of financial self-efficacy (FSE) in moderating the relationship between market volatility and financial satisfaction within a sample of 3,405 adults 50 years old and over from the Health and Retirement Study. Results revealed that market volatility had no statistically significant effect with financial satisfaction for those with moderate or high FSE, but market volatility did have a negative effect for those with low FSE. Results suggest that FSE is an important predictor of financial satisfaction amidst market volatility and should be considered when establishing an appropriate asset allocation for client portfolios. Journal: Journal of Behavioral Finance Pages: 42-52 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1434655 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1434655 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:42-52 Template-Type: ReDIF-Article 1.0 Author-Name: Markum Reed Author-X-Name-First: Markum Author-X-Name-Last: Reed Author-Name: Kaotar Ankouri Author-X-Name-First: Kaotar Author-X-Name-Last: Ankouri Title: Collective Perception and Exchange Rates Abstract: The authors' research suggests that people search online for information on currency exchange rates and that this information-seeking process can be translated into data on people's interest for a given currency. The authors utilize Google Trends data to capture the level of interest in 3 currency pairs: the euro, the pound sterling, and the Canadian dollar against the U.S. dollar and conduct a multivariate data analysis in the context of vector-autoregressive models. The findings suggest that there is a small but significant impact on collective perception on exchange rates. The authors show that Google Trends data could be an important source of information for investors looking into exchange rate trends. Journal: Journal of Behavioral Finance Pages: 53-65 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1461100 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1461100 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:53-65 Template-Type: ReDIF-Article 1.0 Author-Name: Swee-Hoon Chuah Author-X-Name-First: Swee-Hoon Author-X-Name-Last: Chuah Author-Name: Robert Hoffmann Author-X-Name-First: Robert Author-X-Name-Last: Hoffmann Author-Name: Bin Liu Author-X-Name-First: Bin Author-X-Name-Last: Liu Author-Name: Monica Tan Author-X-Name-First: Monica Author-X-Name-Last: Tan Title: Is Knowledge Cursed When Forecasting the Forecasts of Others? Abstract: Financial decision makers (lenders, insurers, advisees) often need to estimate how well others make decisions. Is knowledge a blessing or a curse when forecasting others' forecast accuracy? The authors show that this depends on its type. Within a single experimental setting, they identify and test 4 distinct information types that have different effects on forecast accuracy. First, the authors revisit the well-known “curse of knowledge” and show that it may have resulted from entirely arbitrary, uninformative anchors. Second, we show that in contrast, genuinely informative cues purged of anchoring potential enhance estimation accuracy. Third, richer, more detailed financial information has no effect even for participants better able to interpret it. Fourth, domain experts do not overimpute others' forecast ability. The authors conclude that in financial settings knowledge may be a blessing or a curse, or have no effect depending on its type. Journal: Journal of Behavioral Finance Pages: 66-72 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1464454 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1464454 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:66-72 Template-Type: ReDIF-Article 1.0 Author-Name: Feng Dong Author-X-Name-First: Feng Author-X-Name-Last: Dong Author-Name: Son Dang Wilson Author-X-Name-First: Son Dang Author-X-Name-Last: Wilson Title: Does High Stock Price Synchronicity Always Hurt Mutual Fund Industry? Sentiment Matters Abstract: Investors have agreed that high synchronicity of stock returns adversely influences professional funds' profitability. However, different market conditions where high synchronicity exists may have different effects on this relationship. This study incorporates aggregate investor sentiment as a market condition in the equation to explore whether and when the negative association between synchronicity and fund performance holds. The authors use a sample of actively managed U.S. equity mutual funds from 2000 to 2014 and employ a portfolio of 11 passively managed funds as the benchmark to measure fund performance and fund management skill. They find empirical evidence that synchronicity negatively impacts mutual funds' profitability when the investor sentiment is low. This negative relationship disappears in high-sentiment periods. They also find that in both low- and high-sentiment states, fund managers with superior stock selection skill make more profits from high synchronicity than the average. Journal: Journal of Behavioral Finance Pages: 73-80 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1459623 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1459623 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:73-80 Template-Type: ReDIF-Article 1.0 Author-Name: Samer Adra Author-X-Name-First: Samer Author-X-Name-Last: Adra Author-Name: Elie Menassa Author-X-Name-First: Elie Author-X-Name-Last: Menassa Title: Paradigm Conflict and the Wealth Effects of Blockholder Formation in Private Target Acquisitions Abstract: Decision making in public companies follows an organized structure dominated by risk aversion. The decisions in private entrepreneurial firms tend to be driven by overconfidence and reliance on trial and error. Such entrepreneurial attitudes are reinforced by high levels of profitability. The authors argue that this difference in decision-making paradigms limits the wealth effect of blockholder formation by the profitable private target's owners in mergers and acquisitions. Blockholder formation by private target owners is associated with substantial acquirer shareholder gains in the acquisitions of targets with relatively low and moderate profitability levels. To the opposite, the market reacts to blockholder formation by the owners of highly profitable targets with skepticism. Such announcements are associated with insignificant wealth effects overall and substantial acquirer losses in acquisitions in human capital-intensive sectors whereby disagreements are likely to be consequential. Acquirers understand these wealth effects and reduce the extent of stock financing when acquiring highly profitable targets. Journal: Journal of Behavioral Finance Pages: 81-95 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1461101 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1461101 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:81-95 Template-Type: ReDIF-Article 1.0 Author-Name: Philip W. S. Newall Author-X-Name-First: Philip W. S. Author-X-Name-Last: Newall Author-Name: Katie N. Parker Author-X-Name-First: Katie N. Author-X-Name-Last: Parker Title: Improved Mutual Fund Investment Choice Architecture Abstract: Two choice architecture interventions were explored to debias investors' irrational preference for mutual funds with high past returns rather than funds with low fees. A simple choice task was used involving a direct trade-off between maximizing past returns and minimizing fees. In the first intervention, warning investors that “Some people invest based on past performance, but funds with low fees have the highest future results” was more effective than 3 other disclosure statements, including the U.S. financial regulator's, “Past performance does not guarantee future results.” The second intervention involved converting mutual fund annual percentage fees into a 10-year dollar cost equivalent. This intervention also improved investors' fee sensitivity, and remained effective even as past returns increased. Financially literate participants were surprisingly more likely to irrationally maximize past returns in their investment choices. Journal: Journal of Behavioral Finance Pages: 96-106 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1464455 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1464455 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:96-106 Template-Type: ReDIF-Article 1.0 Author-Name: Marco Cecchini Author-X-Name-First: Marco Author-X-Name-Last: Cecchini Author-Name: Emanuele Bajo Author-X-Name-First: Emanuele Author-X-Name-Last: Bajo Author-Name: Paolo Maria Russo Author-X-Name-First: Paolo Maria Author-X-Name-Last: Russo Author-Name: Maurizio Sobrero Author-X-Name-First: Maurizio Author-X-Name-Last: Sobrero Title: Individual Differences in the Disposition Effect Abstract: The authors model the role of personality traits in explaining the disposition effect building on realization utility theory and Big 5 model and moving from an aggregate level to interindividual differences. The experimental analysis, combining NEO Revised Personality Inventory measures with individual financial data from a trading simulation run by 230 individuals in China and Italy, shows that the disposition effect is driven by 2 distinct psychological processes, one related to holding losers and the other to selling winners. These 2 behavioral mechanisms are uncorrelated and influenced by different personality traits. Controlling for different demographic variables, the authors show (a) a greater sensitivity of the rewarding system that motivates “extroverts” to quickly sell the stock at gain to receive a burst of utility; (b) a tendency for “conscientious” subjects to suppress impulsivity, patiently waiting for higher cumulative returns; and (c) the importance of “openness to experience” to better value information to achieve higher outcomes. Journal: Journal of Behavioral Finance Pages: 107-126 Issue: 1 Volume: 20 Year: 2019 Month: 1 X-DOI: 10.1080/15427560.2018.1492579 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1492579 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:107-126 Template-Type: ReDIF-Article 1.0 Author-Name: Frederik König Author-X-Name-First: Frederik Author-X-Name-Last: König Title: Analyst Behavior: The Geography of Social Interaction Abstract: In this paper, I provide empirical evidence that an analyst working in Germany is more likely to publish a high (low) price target regarding a DAX30 stock when other Germany based analysts are also optimistic (pessimistic) about the same stock. This effect of geographical proximity is not biased by the fact that DAX30 companies are headquartered in Germany. Shedding light on how influence takes place, I show that influence through communication and the exchange of opinion within small groups of analysts plays a vital role. This mainly applies during a bullish market environment. When markets are bearish, analysts' incentives induce them not to deviate too much from the overall average, such that then observational learning has a greater impact. Journal: Journal of Behavioral Finance Pages: 201-216 Issue: 3 Volume: 17 Year: 2016 Month: 7 X-DOI: 10.1080/15427560.2016.1171223 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1171223 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:3:p:201-216 Template-Type: ReDIF-Article 1.0 Author-Name: Sheridan Taylor Author-X-Name-First: Sheridan Author-X-Name-Last: Taylor Author-Name: Roger Taylor Author-X-Name-First: Roger Author-X-Name-Last: Taylor Title: The Effect of Style, Feedback, and Context on Portfolio Exploratory Behavior Abstract: This paper reports empirical evidence for the impact of investor style differences and context on exploratory behavior within the management of investment portfolios. The paper looks at the effect of short-term feedback and context on behavior and offers new perspectives on the processes by which decisions are made under conditions of rapid change and uncertainty. The results show that search behavior is affected by feedback on short-term investment returns and the volatility of those returns, conditional upon investor style and context, with considerable evidence of both reactionary behavior and avoidance within the domain of losses. No evidence is found to support the disposition effect, with investors instead found to be more likely to review and cut material losses based upon overall context. The paper briefly considers cognitive explanations for the results and examines further evidence relating to the process of decision making within complex systems, the applicability of feedback loop models, and the impact of uncertainty on choice preference. Journal: Journal of Behavioral Finance Pages: 217-228 Issue: 3 Volume: 17 Year: 2016 Month: 7 X-DOI: 10.1080/15427560.2016.1170681 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1170681 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:3:p:217-228 Template-Type: ReDIF-Article 1.0 Author-Name: Levon Goukasian Author-X-Name-First: Levon Author-X-Name-Last: Goukasian Author-Name: Qingzhong Ma Author-X-Name-First: Qingzhong Author-X-Name-Last: Ma Author-Name: Wei Zhang Author-X-Name-First: Wei Author-X-Name-Last: Zhang Title: What Is Common Among Return Anomalies? Evidence from Insider Trading Abstract: For a broad set of anomalies, we establish a common pattern of underreaction to information contained in preceding insider trading activity. Our main analysis focuses on the anomalies' short legs, which generate persistent negative abnormal returns. For stocks in the short legs, future returns are systematically related to the information signal contained in preceding insider trading activity, indicating underreaction. For insider trading information, we consider the possibility of net buying, net selling, and no trading (or silence). The underreaction effect is economically significant, with the most negative signal accounting for an average of 71% of short-leg returns. This underreaction effect survives numerous robustness checks and remains important after accounting for investor sentiment, information environment, and limits to arbitrage. Journal: Journal of Behavioral Finance Pages: 229-243 Issue: 3 Volume: 17 Year: 2016 Month: 7 X-DOI: 10.1080/15427560.2016.1170683 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1170683 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:3:p:229-243 Template-Type: ReDIF-Article 1.0 Author-Name: Andreas Roider Author-X-Name-First: Andreas Author-X-Name-Last: Roider Author-Name: Andrea Voskort Author-X-Name-First: Andrea Author-X-Name-Last: Voskort Title: Reputational Herding in Financial Markets: A Laboratory Experiment Abstract: We study reputational herding in financial markets in a laboratory experiment. In the spirit of Dasgupta and Prat [2008], career concerns are introduced in a sequential asset market where wages for investors are set by subjects in the role of employers. Employers can observe investment behavior, but not investors' ability types. Thereby, reputational incentives may arise endogenously. We find that a sizable fraction of investors follows an established trend even in a setting where there are no reputational incentives. In a setting where there are reputational concerns, they do not seem to create substantial herd behavior. Journal: Journal of Behavioral Finance Pages: 244-266 Issue: 3 Volume: 17 Year: 2016 Month: 7 X-DOI: 10.1080/15427560.2016.1203322 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1203322 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:3:p:244-266 Template-Type: ReDIF-Article 1.0 Author-Name: Sivan Riff Author-X-Name-First: Sivan Author-X-Name-Last: Riff Author-Name: Yossi Yagil Author-X-Name-First: Yossi Author-X-Name-Last: Yagil Title: Behavioral Factors Affecting the Home Bias Phenomenon: Experimental Tests Abstract: Although international portfolio theory states that an optimal portfolio should be well diversified, in practice, investors tend to invest excessively in domestic assets. This tendency, which is commonly referred to in the finance literature as “home bias” (HB), has puzzled economists for many decades. This research develops and presents experiments designed to test the behavioral factors related to HB discussed in the literature. In particular, these experiments test whether the factors of “familiarity” and “fluency” (ease of pronunciation) affect HB. In addition, using a method of controlled experiments, we examine the willingness to take risk as a basic source of HB. We also examine HB under three different market conditions (normal, bear and bull markets). Results indicate that subjects tended to take less risk with foreign, unfamiliar and nonfluent (difficult to pronounce) assets compared with local, familiar and fluent assets. This tendency increased significantly when the three factors were present together (foreign, unfamiliar and nonfluent assets) compared with when only one of the three factors was present. The results also revealed that HB increased during bear market periods. Journal: Journal of Behavioral Finance Pages: 267-279 Issue: 3 Volume: 17 Year: 2016 Month: 7 X-DOI: 10.1080/15427560.2016.1203324 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1203324 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:3:p:267-279 Template-Type: ReDIF-Article 1.0 Author-Name: Julija Michailova Author-X-Name-First: Julija Author-X-Name-Last: Michailova Author-Name: Ulrich Schmidt Author-X-Name-First: Ulrich Author-X-Name-Last: Schmidt Title: Overconfidence and Bubbles in Experimental Asset Markets Abstract: This paper investigates the relationship between market overconfidence and occurrence of stock-price bubbles. Sixty participants traded stocks in 10 experimental asset markets. Markets were constructed on the basis of subjects' overconfidence: The most overconfident subjects form high overconfidence markets and the least overconfident subjects low overconfidence markets. Prices in low overconfidence markets tend to track the fundamental asset value more accurately than prices in high overconfidence markets and are significantly lower and less volatile. Additionally, we observe significantly higher bubble measures and trading volume in high overconfidence markets. Two possible explanations for these differences are analyzed: While price expectations are significantly higher in high overconfidence markets, no differences in the average degree of risk aversion were detected. Journal: Journal of Behavioral Finance Pages: 280-292 Issue: 3 Volume: 17 Year: 2016 Month: 7 X-DOI: 10.1080/15427560.2016.1203325 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1203325 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:3:p:280-292 Template-Type: ReDIF-Article 1.0 Author-Name: Olivier Mesly Author-X-Name-First: Olivier Author-X-Name-Last: Mesly Author-Name: Stéphane Bouchard Author-X-Name-First: Stéphane Author-X-Name-Last: Bouchard Title: Predatory-Prey Decision Making During Market Bubbles—Preliminary Evidence from a Neurobiological Study Abstract: The present paper examines decision making during market bubbles. In the context of high market volatility, high speculation and inappropriate regulation (e.g., as such was the case in the years prior to the 2008 subprime crisis), market agents adopt either a predator or prey position. By way of a neurobiological study, it is shown that market-agent-turned preys benefit from moderate stress when it enhances their level of vigilance; however, past a certain stress threshold, their efforts at wealth maximization are considerably reduced. This may explain some of the cognitive causes of failures found by various authors in their description of the market bubble phenomenon. The paper emphasizes the importance of setting up proper regulations aimed at preventing the emergence of predatory behaviors (such as those that prevailed with the establishment of predatory mortgages during the year 2000 in the United States) and better educating average investors. Journal: Journal of Behavioral Finance Pages: 293-308 Issue: 3 Volume: 17 Year: 2016 Month: 7 X-DOI: 10.1080/15427560.2016.1203326 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1203326 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:3:p:293-308 Template-Type: ReDIF-Article 1.0 Author-Name: Sarah D. Asebedo Author-X-Name-First: Sarah D. Author-X-Name-Last: Asebedo Author-Name: Martin C. Seay Author-X-Name-First: Martin C. Author-X-Name-Last: Seay Author-Name: Kristy Archuleta Author-X-Name-First: Kristy Author-X-Name-Last: Archuleta Author-Name: Gary Brase Author-X-Name-First: Gary Author-X-Name-Last: Brase Title: The Psychological Predictors of Older Preretirees’ Financial Self-Efficacy Abstract: Financial self-efficacy (FSE) is a psychological trait that has significant influence over a wide array of financial behavior—from credit market participation to saving and investing behavior. Research has provided consistent evidence that suggests higher FSE supports prudent and growth-oriented financial behavior across a variety of samples. For older adults, FSE has been shown to be weak and susceptible to decline, which is concerning because older adults need to save significantly for retirement, with little time to do so. While research has provided some insight into the sociodemographic and economic factors related to FSE (e.g., income), little is understood about the psychological factors that contribute to FSE levels. Consequently, the authors investigate how psychological characteristics shape FSE within a sample of 2,068 U.S. preretirees from the Health and Retirement Study. Results revealed that FSE can be supported through frequent positive affect, reduced negative affect, stronger mastery beliefs, and a higher task orientation. With this knowledge, financial professionals can more effectively help support older preretirees’ FSE and ultimately, their ability to prepare financially for retirement. Journal: Journal of Behavioral Finance Pages: 127-138 Issue: 2 Volume: 20 Year: 2019 Month: 4 X-DOI: 10.1080/15427560.2018.1492580 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1492580 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:127-138 Template-Type: ReDIF-Article 1.0 Author-Name: Hammad Siddiqi Author-X-Name-First: Hammad Author-X-Name-Last: Siddiqi Title: Anchoring-Adjusted Option Pricing Models Abstract: Relying on a useful starting point and attempting to adjust it appropriately is a robust human decision-making heuristic. Evidence suggests that underlying stock volatility is such a starting point, which is scaled up to estimate call option volatility. The author adjusts the Black-Scholes, Heston, and Bates models for reliance on this starting point. The adjustment mechanism captures several option-return puzzles. The adjusted Black-Scholes generates implied-volatility skew. The adjusted Heston stochastic-volatility model matches the same data better, does so at more plausible parameter values, and generates a steep short-term skew. Furthermore, 2 novel predictions are empirically tested and strongly supported in the data. Journal: Journal of Behavioral Finance Pages: 139-153 Issue: 2 Volume: 20 Year: 2019 Month: 4 X-DOI: 10.1080/15427560.2018.1492922 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1492922 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:139-153 Template-Type: ReDIF-Article 1.0 Author-Name: Robert B. Durand Author-X-Name-First: Robert B. Author-X-Name-Last: Durand Author-Name: Manapon Limkriangkrai Author-X-Name-First: Manapon Author-X-Name-Last: Limkriangkrai Author-Name: Lucia Fung Author-X-Name-First: Lucia Author-X-Name-Last: Fung Title: Exogenous and Endogenous Attention and the Convergence of Analysts’ Forecasts Abstract: The propensity of the forecasts of sell-side financial analysts to converge (or diverge) is a function of their exogenous and endogenous selective attention and overconfidence. When returns are negative, the endogenous form of selective attention—a static measure of analysts’ goal-driven attention at a particular point in time—has a positive association with convergence. The exogenous form of selective attention—a relatively involuntary dynamic process of exogenous attentional shift driven by external changes in the market over time—is associated with a tendency for forecasts to diverge. Journal: Journal of Behavioral Finance Pages: 154-172 Issue: 2 Volume: 20 Year: 2019 Month: 4 X-DOI: 10.1080/15427560.2018.1504783 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1504783 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:154-172 Template-Type: ReDIF-Article 1.0 Author-Name: Richard Deaves Author-X-Name-First: Richard Author-X-Name-Last: Deaves Author-Name: Jin Lei Author-X-Name-First: Jin Author-X-Name-Last: Lei Author-Name: Michael Schröder Author-X-Name-First: Michael Author-X-Name-Last: Schröder Title: Forecaster Overconfidence and Market Survey Performance Abstract: The authors document using the ZEW panel of German stock market forecasters that weak forecasters tend to be overconfident in the sense that they provide extreme forecasts and their confidence intervals are less likely to contain eventual realizations. They further show that moderate filters based on forecast accuracy of past performance over short rolling windows, which delicately balance ignoring relevant information and noise reduction, are somewhat successful in improving predictability. While poor performance can be due to various factors, a filter based on forecaster overconfidence, a prior tendency to have high forecast standard deviations, also improves the performance of market survey forecasts. Journal: Journal of Behavioral Finance Pages: 173-194 Issue: 2 Volume: 20 Year: 2019 Month: 4 X-DOI: 10.1080/15427560.2018.1505727 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1505727 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:173-194 Template-Type: ReDIF-Article 1.0 Author-Name: Riza Demirer Author-X-Name-First: Riza Author-X-Name-Last: Demirer Author-Name: Huacheng Zhang Author-X-Name-First: Huacheng Author-X-Name-Last: Zhang Title: Industry Herding and the Profitability of Momentum Strategies During Market Crises Abstract: The degree of industry herding is significantly related to the subsequent performance of winner and loser industries. While the herding effect on losers is not inconsistent with investors’ tendency to herd on negative information, the herding effect on winners reflects institutional demand for overpriced securities. An alternative momentum strategy based on the degree of herding within an industry significantly outperforms the conventional industry momentum strategy over the subsequent 1, 3, 6, and 12 months. The findings suggest that behavioral patterns could be utilized to generate enhanced momentum profits, even during market stress periods when the conventional momentum strategy performs poorly. Journal: Journal of Behavioral Finance Pages: 195-212 Issue: 2 Volume: 20 Year: 2019 Month: 4 X-DOI: 10.1080/15427560.2018.1505728 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1505728 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:195-212 Template-Type: ReDIF-Article 1.0 Author-Name: Di Wu Author-X-Name-First: Di Author-X-Name-Last: Wu Title: Does Social Media Get Your Attention? Abstract: The author investigates how social media affects stock prices and post–earnings announcement drift in response to companies’ quarterly earnings announcements. Using quarterly earnings data as well Twitter and StockTwits data, the author utilizes Twitter volume and a residual methodology to generate an attention proxy that is orthogonal to the growth of Twitter accounts. The author finds that the new attention brought by social media after the earnings announcements positively affects the cumulative abnormal returns. Further, even companies reporting bad news can still have positive immediate cumulative abnormal returns if they attract enough attention from investors after an earnings announcement. The new attention effects are different in both magnitudes and statistical significance between social media popular and unpopular industries. Journal: Journal of Behavioral Finance Pages: 213-226 Issue: 2 Volume: 20 Year: 2019 Month: 4 X-DOI: 10.1080/15427560.2018.1505729 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1505729 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:213-226 Template-Type: ReDIF-Article 1.0 Author-Name: Raúl Gómez Martínez Author-X-Name-First: Raúl Author-X-Name-Last: Gómez Martínez Author-Name: Miguel Prado Román Author-X-Name-First: Miguel Author-X-Name-Last: Prado Román Author-Name: Paola Plaza Casado Author-X-Name-First: Paola Author-X-Name-Last: Plaza Casado Title: Big Data Algorithmic Trading Systems Based on Investors’ Mood Abstract: Traditional automated trading systems use rules and filters based on Chartism to send orders to the market, aiming to beat the market and obtain positive returns in bullish or bearish contexts. However, these systems do not consider the investors’ mood that many studies have demonstrated its effects over the evolution of financial markets. The authors describe 2 "big data" algorithmic trading systems over Ibex 35 future. These systems send orders to the market to open long or short positions, based on an artificial intelligence model that uses investors’ mood. To measure the investors' mood, the authors use semantic analysis algorithms that qualify as good, bad, or neutral any communication related to Ibex 35 made on social media (Twitter) or news media. After 1.5 years of research, conclusions are: First, the authors observe positive returns, demonstrating that investors’ mood has predictive capacity on the evolution of the Ibex 35. Second, these systems have beaten the Ibex 35 index, showing the imperfect efficiency of the financial markets. Third, big data algorithmic trading systems numbers are better in Sharpe ratio, success rate, and profit factor than traditional trading systems on the Ibex 35, listed in the Trading Motion platform. Journal: Journal of Behavioral Finance Pages: 227-238 Issue: 2 Volume: 20 Year: 2019 Month: 4 X-DOI: 10.1080/15427560.2018.1506786 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1506786 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:227-238 Template-Type: ReDIF-Article 1.0 Author-Name: Ali Irannezhad Ajirlou Author-X-Name-First: Ali Author-X-Name-Last: Irannezhad Ajirlou Author-Name: Hamidreza Esmalifalak Author-X-Name-First: Hamidreza Author-X-Name-Last: Esmalifalak Author-Name: Maryam Esmalifalak Author-X-Name-First: Maryam Author-X-Name-Last: Esmalifalak Author-Name: Sahar Pordeli Behrouz Author-X-Name-First: Sahar Author-X-Name-Last: Pordeli Behrouz Author-Name: Farid Soltanalizadeh Author-X-Name-First: Farid Author-X-Name-Last: Soltanalizadeh Title: Market Moods and Network Dynamics of Stock Returns: The Bipolar Behavior Abstract: The authors show that a simple mood-separable preference in a network study of stock returns captures a variety of stylized facts regarding stocks’ provisional (ab)normal behavior. These behaviors are articulated in a multistate complete Euclidean network model that specifies the existence, direction, and magnitude of a self-organized dynamics for each individual stock during abnormal market moods. In the empirical setting, the authors apply suggested model along with 2 established visual approaches (multidimensional scaling and agglomerative hierarchical clustering) for benchmark purposes. Results reveal different levels of erratic return dynamics for each stock and the entire market in different abnormal market moods. The authors model and interpret these self-organized dynamics as evidence of stocks’ and market’s bipolar behavior. Journal: Journal of Behavioral Finance Pages: 239-254 Issue: 2 Volume: 20 Year: 2019 Month: 4 X-DOI: 10.1080/15427560.2018.1508022 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1508022 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:239-254 Template-Type: ReDIF-Article 1.0 Author-Name: Martina Raue Author-X-Name-First: Martina Author-X-Name-Last: Raue Author-Name: Lisa A. D'Ambrosio Author-X-Name-First: Lisa A. Author-X-Name-Last: D'Ambrosio Author-Name: Joseph F. Coughlin Author-X-Name-First: Joseph F. Author-X-Name-Last: Coughlin Title: The Power of Peers: Prompting Savings Behavior Through Social Comparison Abstract: In 2 experimental studies (Study 1: n = 1,155; Study 2, n = 630), the authors used a social norms approach to promote savings behavior. Many people do not save enough for retirement, which may be due to uncertainty about the future or saving plans. Making social comparisons can reduce uncertainty and upward comparisons can provide the motivation to improve. For this reason, the authors gave participants social feedback on their savings decisions. Participants who were randomly told that they underperformed in comparison with their peers were more likely to make changes to their allocation. In Study 1, this group increased their savings more than were those who had been categorized among the better performers or overperformers, or who did not receive social information. Participants were generally more likely to change their behavior when they perceived their performance as being average or below average. The results demonstrate that a social comparison approach has the potential to motivate people to start saving for retirement or increase their current savings. Journal: Journal of Behavioral Finance Pages: 1-13 Issue: 1 Volume: 21 Year: 2020 Month: 1 X-DOI: 10.1080/15427560.2019.1587762 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1587762 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:1-13 Template-Type: ReDIF-Article 1.0 Author-Name: Keith Jakob Author-X-Name-First: Keith Author-X-Name-Last: Jakob Author-Name: Yoonsoo Nam Author-X-Name-First: Yoonsoo Author-X-Name-Last: Nam Title: Heaping on Dividends: The Role of Dividend Size and Information Uncertainty Abstract: The authors examine whether a cognitive bias influences dividend policy. They find that managers use a heaping heuristic when choosing the amount of their firm’s dividend. Heaping is a human error or bias to round numbers even though precise values are desired. This bias leads to dividend distributions clustered at specific amounts. Dividend size and the level of information uncertainty faced by management help explain the likelihood of heaping. The authors also observe that heaped dividends are “sticky” and altered less frequently, and when there is a dividend change, heaped dividends are more often switched to another heaped amount. Journal: Journal of Behavioral Finance Pages: 14-26 Issue: 1 Volume: 21 Year: 2020 Month: 1 X-DOI: 10.1080/15427560.2019.1587763 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1587763 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:14-26 Template-Type: ReDIF-Article 1.0 Author-Name: Wei-Fong Pan Author-X-Name-First: Wei-Fong Author-X-Name-Last: Pan Title: Does Investor Sentiment Drive Stock Market Bubbles? Beware of Excessive Optimism! Abstract: The author examines the relationship between stock market bubbles and investor sentiment, as proxied by consumer confidence indices. The results indicate that investor sentiment significantly explains stock bubble probability and bubble expansion. Evidence suggests that investor sentiment positively affects the probability of stock bubble occurrences and bubble sizes. Evidence from impulse responses also suggests that investor sentiment positively reacts to bubble shocks. Further, the author observes that overly optimistic investor sentiment (a sentiment index that is too high) can be a useful predictor of a bubble burst. These findings are robust based on various model specifications. Journal: Journal of Behavioral Finance Pages: 27-41 Issue: 1 Volume: 21 Year: 2020 Month: 1 X-DOI: 10.1080/15427560.2019.1587764 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1587764 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:27-41 Template-Type: ReDIF-Article 1.0 Author-Name: John Griffith Author-X-Name-First: John Author-X-Name-Last: Griffith Author-Name: Mohammad Najand Author-X-Name-First: Mohammad Author-X-Name-Last: Najand Author-Name: Jiancheng Shen Author-X-Name-First: Jiancheng Author-X-Name-Last: Shen Title: Emotions in the Stock Market Abstract: The authors explore the interaction between media content and market returns and volatility. They utilize propriety investor sentiment measures developed by Thompson Reuters MarketPsych. The data are from a commercial-strength comprehensive textual analysis that provides 24-hr rolling average scores of total references in the news and social media by counting overall positive references net of negative references. The authors select 4 measures of investor sentiment that reflect both pessimism and optimism of small investors. These measures are fear, gloom, joy, and stress. The objective is twofold. First, the authors examine the ability of these sentiment measures to predict market returns. Second, they are interested in exploring the effects of these sentiment measures on market return and volatility. For this purpose, the authors utilize threshold generalized autoregressive conditional heteroskedasticity models. They explore the ability of sentiment measures to predict both the level of and change in market returns. The sentiment measure of stress has a small effect on the market return for a 1-day lag. The other 2 sentiment measures, gloom and joy, seem to play no role in predicting market returns. Furthermore, the authors find that fear among investors has a major and lasting effect on market returns and conditional volatility. Journal: Journal of Behavioral Finance Pages: 42-56 Issue: 1 Volume: 21 Year: 2020 Month: 1 X-DOI: 10.1080/15427560.2019.1588275 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1588275 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:42-56 Template-Type: ReDIF-Article 1.0 Author-Name: Qiang Bu Author-X-Name-First: Qiang Author-X-Name-Last: Bu Title: Investor Sentiment and Mutual Fund Alpha Abstract: The author examines the relationship between investor sentiment and mutual fund alpha. The author finds that investor sentiment plays a significant role in the value and occurring probability of alpha and the probability of earning alpha is high when investor sentiment gets higher. Also, the author finds that a benchmark model adjusted by investor sentiment can significantly reduce the occurring probability of fund alpha. Overall investor sentiment is an essential factor missing in extant benchmark models. A robustness check confirms this finding. Journal: Journal of Behavioral Finance Pages: 57-65 Issue: 1 Volume: 21 Year: 2020 Month: 1 X-DOI: 10.1080/15427560.2019.1594814 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1594814 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:57-65 Template-Type: ReDIF-Article 1.0 Author-Name: Kelley Bergsma Author-X-Name-First: Kelley Author-X-Name-Last: Bergsma Author-Name: Andy Fodor Author-X-Name-First: Andy Author-X-Name-Last: Fodor Author-Name: Emily Tedford Author-X-Name-First: Emily Author-X-Name-Last: Tedford Title: A Closer Look at the Disposition Effect in U.S. Equity Option Markets Abstract: The authors explore whether the disposition effect occurs in U.S. equity option markets. The disposition effect implies past winning securities will be undervalued and past losing securities will be overvalued. By adapting Grinblatt and Han’s unrealized capital gains proxy to the option markets, the authors document a significant relationship between option capital gains overhang and option returns. They also find open interest decreases as option capital gains overhang increases, consistent with a disposition effect in U.S. equity options. This evidence contributes to the emerging literature on behavioral finance in derivative securities. Journal: Journal of Behavioral Finance Pages: 66-77 Issue: 1 Volume: 21 Year: 2020 Month: 1 X-DOI: 10.1080/15427560.2019.1615913 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1615913 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:66-77 Template-Type: ReDIF-Article 1.0 Author-Name: Vladimir Anic Author-X-Name-First: Vladimir Author-X-Name-Last: Anic Author-Name: Martin Wallmeier Author-X-Name-First: Martin Author-X-Name-Last: Wallmeier Title: Perceived Attractiveness of Structured Financial Products: The Role of Presentation Format and Reference Instruments Abstract: Structured equity-linked products hold a strong position in the asset universe in Europe, although they are often considered to be overly complex. Their risk and return profile is typically presented by simple payoff diagrams and verbal descriptions. The authors propose to complement the payoff diagrams with information on the payoff’s probability distribution and study different presentation formats in an experimental setting with multiple investment decisions. They introduce a flexible framework for designing tailor-made products, which allows them to implement a part of the experiment as an interactive exploration in which the participants experience the risk-return tradeoff and the role of different features of structured products. The authors find that displaying probability histograms can have a strong effect on the perceived attractiveness of the products by revealing the loss probability. In contrast to common practice, the present results suggest that the reference instrument shown in graphical displays should be risk-adjusted to match the risk of the structured product. Otherwise, a preference for lower risk might be misinterpreted as a preference for a specific return profile. These findings can be used to improve information documents for investors such as the “Key Information Document” required by European regulation. Journal: Journal of Behavioral Finance Pages: 78-102 Issue: 1 Volume: 21 Year: 2020 Month: 1 X-DOI: 10.1080/15427560.2019.1629441 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1629441 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:78-102 Template-Type: ReDIF-Article 1.0 Author-Name: Sowmya Subramaniam Author-X-Name-First: Sowmya Author-X-Name-Last: Subramaniam Author-Name: Madhumita Chakraborty Author-X-Name-First: Madhumita Author-X-Name-Last: Chakraborty Title: Investor Attention and Cryptocurrency Returns: Evidence from Quantile Causality Approach Abstract: The erratic price behavior and inefficiency in the crypto markets offer possibility to examine the behavioral aspects in cryptocurrency prices. Further, the cryptocurrency market is dominated by the retail investor providing an interesting platform to examine the impact of attention-driven trading in this particular asset class. Thus, the authors investigate the influence of investor attention in the cryptocurrency prices using the quantile causality approach. The results indicate that investors pay attention to the frequent news-making and ranked cryptos (Bitcoin and Ethereum). For newer cryptocurrencies like Ripple, investor attention influences their prices only during superior performance. The study provides evidence of attention-induced price pressure hypothesis in the prices of cryptocurrencies during expansionary phases and fear selling during poor market performance. Journal: Journal of Behavioral Finance Pages: 103-115 Issue: 1 Volume: 21 Year: 2020 Month: 1 X-DOI: 10.1080/15427560.2019.1629587 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1629587 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:1:p:103-115 Template-Type: ReDIF-Article 1.0 Author-Name: Bryan C. McCannon Author-X-Name-First: Bryan C. Author-X-Name-Last: McCannon Author-Name: Jeffrey Peterson Author-X-Name-First: Jeffrey Author-X-Name-Last: Peterson Title: Born for Finance? Experimental Evidence of the Impact of Finance Education Abstract: What impact does a finance education have on the behaviors of individuals? Experiments of an investment game are conducted where a wealth-creating investment decision is made. After it grows, the recipient selects how much to return. The econometric method used allows for a disentangling of the selection effects from learning. We show that finance students are both born and made. Those who choose to study finance do not necessarily make trusting investments or volunteer to return the proceeds, but the effect of the education is to reverse these behaviors promoting pro-social, trusting, and reciprocating choices that generate wealth. Journal: Journal of Behavioral Finance Pages: 199-205 Issue: 3 Volume: 16 Year: 2015 Month: 7 X-DOI: 10.1080/15427560.2015.1064933 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1064933 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:3:p:199-205 Template-Type: ReDIF-Article 1.0 Author-Name: Hui-Chu Shu Author-X-Name-First: Hui-Chu Author-X-Name-Last: Shu Author-Name: Jung-Hsien Chang Author-X-Name-First: Jung-Hsien Author-X-Name-Last: Chang Title: Investor Sentiment and Financial Market Volatility Abstract: Empirical studies have documented the influence of investor sentiment on financial markets, but the underlying economic mechanism remains unclear. This study links psychological research and a traditional asset-pricing model to investigate the influence of investor sentiment variations on financial markets. By relaxing the assumption of investor rationality, this investigation shows that a modified Lucas [1978] model can adequately interpret prominent financial market anomalies, such as high volatility, bubble and crash formation, and the relationships among investor sentiment, asset prices and expected returns. Journal: Journal of Behavioral Finance Pages: 206-219 Issue: 3 Volume: 16 Year: 2015 Month: 7 X-DOI: 10.1080/15427560.2015.1064930 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1064930 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:3:p:206-219 Template-Type: ReDIF-Article 1.0 Author-Name: João Paulo Vieito Author-X-Name-First: João Paulo Author-X-Name-Last: Vieito Author-Name: Armando Freitas da Rocha Author-X-Name-First: Armando Freitas Author-X-Name-Last: da Rocha Author-Name: Fabio Theoto Rocha Author-X-Name-First: Fabio Theoto Author-X-Name-Last: Rocha Title: Brain Activity of the Investor's Stock Market Financial Decision Abstract: Using electroencephalogram technologies (EEG) to map the brain, this investigation is among the first to analyze if the same brain circuits are used when making buying, selling, or holding stock decisions and if different circuits are used when market conditions change such as in a growing market or a high volatility market. Two groups of 20 volunteers were used. One group initiated the trading process in a market with steadily increasing prices and then moved to a high volatility market, and the second group started trading in a high volatility market and then in a growing market.Results are quite innovative in the area of finance: brain mapping associated with such decisions differs between these two groups, and also when buying, selling, or holding decisions were made. These results clearly demonstrate that people may use different reasoning strategies to make financial decisions depending on their trading experience. Journal: Journal of Behavioral Finance Pages: 220-230 Issue: 3 Volume: 16 Year: 2015 Month: 7 X-DOI: 10.1080/15427560.2015.1064931 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1064931 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:3:p:220-230 Template-Type: ReDIF-Article 1.0 Author-Name: H. Joel Jeffrey Author-X-Name-First: H. Author-X-Name-Last: Joel Jeffrey Author-Name: Anthony O. Putman Author-X-Name-First: Anthony O. Author-X-Name-Last: Putman Title: Subjective Probability in Behavioral Economics and Finance: A Radical Reformulation Abstract: Behavioral finance depends intimately on the notion of subjective probability, which has been universally treated as one of the two forms of probability. A substantial body of work and recent experimental results show conclusively that this approach is invalid: subjective and objective probabilities cannot be treated as two sides of the same coin. This raises serious questions about calculations based on that assumption, decisions based on those calculations, and what to do if assigning numerical values and calculating expected values based on subjective probabilities is invalid. This paper presents a radical re-formulation of subjective probability, showing that what have been called “subjective probabilities” are properly formulated as uncertainty appraisals, re-descriptions of states of affairs carrying tautological implications for action. A novel formulation of the decision maker's field-of-view, based on the concept of Actor, Observer, and Critic roles, combined with the uncertainty appraisal formulation, is used to develop new methods for evaluating data, finding patterns in data, and integrating probabilities and uncertainty appraisals, that is, those aspects that have, until now, been called “subjective probabilities.” Journal: Journal of Behavioral Finance Pages: 231-249 Issue: 3 Volume: 16 Year: 2015 Month: 7 X-DOI: 10.1080/15427560.2015.1065262 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1065262 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:3:p:231-249 Template-Type: ReDIF-Article 1.0 Author-Name: Olivier Mesly Author-X-Name-First: Olivier Author-X-Name-Last: Mesly Title: Wealth Maximization in the Context of Blind Trust – A Neurobiological Research Abstract: This paper reviews the paradigm of financial decision making as being oblivious to sentiments such as blind trust. It is based on a recent neurobiological study in which participants' brains were scanned using functional magnetic resonance imaging (fMRI) technology. The study was devised on the tenets of the consolidated model of financial predation (CMFP). It is shown that participants do not target profit maximization concurrently with cost minimization when put in a situation of blind trust. Trust is revealed as a multidimensional construct having mathematical links with other constructs such as perceived predation, cooperation and reward. Journal: Journal of Behavioral Finance Pages: 250-266 Issue: 3 Volume: 16 Year: 2015 Month: 7 X-DOI: 10.1080/15427560.2015.1065263 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1065263 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:3:p:250-266 Template-Type: ReDIF-Article 1.0 Author-Name: Lee-Young Cheng Author-X-Name-First: Lee-Young Author-X-Name-Last: Cheng Author-Name: Zhipeng Yan Author-X-Name-First: Zhipeng Author-X-Name-Last: Yan Author-Name: Yan Zhao Author-X-Name-First: Yan Author-X-Name-Last: Zhao Author-Name: Li-Ming Gao Author-X-Name-First: Li-Ming Author-X-Name-Last: Gao Title: Investor Inattention and Under-Reaction to Repurchase Announcements Abstract: This paper investigates investor inattention as a plausible explanation for market reaction to repurchase announcements. We use prior turnover as the proxy for investor attention to examine the difference in stock price performance between low-attention stocks and high-attention stocks. We find that low prior turnover firms experience greater underreaction to repurchase announcements than high prior turnover firms. Low prior turnover firms also experience larger positive long-run excess returns following announcements. Furthermore, a higher level of investor's inattention leads to higher degree of underreactions, resulting in higher actual completion rates.JEL Classifications: G14, G15 Journal: Journal of Behavioral Finance Pages: 267-277 Issue: 3 Volume: 16 Year: 2015 Month: 7 X-DOI: 10.1080/15427560.2015.1065264 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1065264 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:3:p:267-277 Template-Type: ReDIF-Article 1.0 Author-Name: Philip Y. K. Cheng Author-X-Name-First: Philip Y. K. Author-X-Name-Last: Cheng Title: Risk Willingness and Perceived Utilities to Explain Risky Investment Choices: A Behavioral Model Abstract: The author develops a descriptive behavioral model to explain investment choices in risky assets. Relative to many expected utility theories, the model has advances in some concepts: (a) integrated risk preferences along a continuum of risk willingness, with specific considerations to probabilities of both gains and losses, thus distinguishing risk-averse from risk-venturous investors; (b) third and fourth order of risk preferences corresponding to third and fourth moments of distributions of asset returns; (c) heterogeneous perceived utilities with utilitarian, hedonic, social, and risk-willing dimensions; and (d) risk-willing utilities functions for gains and losses, specifically to explain the observed asymmetries in risk preferences between them. The author discusses the qualitative factors that affect investors’ behavior in risky choices, but still explains their decisions with the traditional concept of utilities. The author validates his model qualitatively against Tversky and Kahneman’s [1992] criteria of an adequate descriptive theory of choice before he concludes. Journal: Journal of Behavioral Finance Pages: 255-266 Issue: 3 Volume: 20 Year: 2019 Month: 7 X-DOI: 10.1080/15427560.2018.1506785 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1506785 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:3:p:255-266 Template-Type: ReDIF-Article 1.0 Author-Name: Austin Murphy Author-X-Name-First: Austin Author-X-Name-Last: Murphy Author-Name: Liang Fu Author-X-Name-First: Liang Author-X-Name-Last: Fu Title: An Empirical Analysis of Investor Confidence Incorporated in Market Prices Abstract: Using market prices for an equity index, this research empirically estimates the complex interrelationship between the confidence of informed investors, aggregate market sentiment, and many other variables. The empirical results uncover new insights on investment behavior, including novel evidence on the root causes of various financial phenomena like the momentum and calendar month effects, which themselves appear to be caused by the incentive systems existing among institutional investors. Investor confidence is found to fall (rise) with moderate (large) deviations between market prices and intrinsic values, but only true knowledge of that variable is discovered to enhance investment returns. Journal: Journal of Behavioral Finance Pages: 267-293 Issue: 3 Volume: 20 Year: 2019 Month: 7 X-DOI: 10.1080/15427560.2018.1511564 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1511564 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:3:p:267-293 Template-Type: ReDIF-Article 1.0 Author-Name: Chiao-Ming Cheng Author-X-Name-First: Chiao-Ming Author-X-Name-Last: Cheng Author-Name: Alex YiHou Huang Author-X-Name-First: Alex Author-X-Name-Last: YiHou Huang Author-Name: Ming-Che Hu Author-X-Name-First: Ming-Che Author-X-Name-Last: Hu Title: Investor Attention and Stock Price Movement Abstract: Prior studies have documented that information presence (absence) leads to price continuation (reversal) when a stock price experiences extreme shock. The authors investigate whether the level of investor attention have an impact on stock price dynamics following the shock. They show that when shocks are not accompanied by new information, the price generally reverses, and the magnitude of the reversal is stronger for stocks with lower degree of investor attention. The asymmetric effect on the magnitude of reversal is stronger for stock with higher return volatility. In addition, for the price shocks accompanied by new information, stock price would continue for a short run, and such continuation is statistically significant and stronger when investors are optimistic toward to the stocks. Journal: Journal of Behavioral Finance Pages: 294-303 Issue: 3 Volume: 20 Year: 2019 Month: 7 X-DOI: 10.1080/15427560.2018.1513404 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1513404 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:3:p:294-303 Template-Type: ReDIF-Article 1.0 Author-Name: Diego Escobari Author-X-Name-First: Diego Author-X-Name-Last: Escobari Author-Name: Mohammad Jafarinejad Author-X-Name-First: Mohammad Author-X-Name-Last: Jafarinejad Title: Investors’ Uncertainty and Stock Market Risk Abstract: The authors propose a novel approach to model investors' uncertainty using the conditional volatility of investors' sentiment. Working with weekly data on investor sentiment, 6 major U.S. stock indices, and alternative measures of uncertainty, they run various tests to validate the proposed measure. The estimates show that investors' uncertainty is greater during economic downturns, and it is linked with lower investors' sentiment. In addition, the results support the existence of a positive conditional correlation between sentiment and returns. This positive spillover between sentiment and returns is interpreted as a positive link between investors' uncertainty and market risk. The authors also find that investors’ uncertainty and market risk are strongly driven by their lagged values. The authors’ measure consistently captures periods of high uncertainty as shown by a positive and highly statistically significant correlation with other existing measures of uncertainty. Journal: Journal of Behavioral Finance Pages: 304-315 Issue: 3 Volume: 20 Year: 2019 Month: 7 X-DOI: 10.1080/15427560.2018.1506787 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1506787 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:3:p:304-315 Template-Type: ReDIF-Article 1.0 Author-Name: Bonha Koo Author-X-Name-First: Bonha Author-X-Name-Last: Koo Author-Name: Joon Chae Author-X-Name-First: Joon Author-X-Name-Last: Chae Author-Name: Hyungjoo Kim Author-X-Name-First: Hyungjoo Author-X-Name-Last: Kim Title: Does Internet Search Volume Predict Market Returns and Investors’ Trading Behavior? Abstract: The authors create a weekly investor sentiment index for Korea using Internet search volume, which directly reflects almost every household’s concerns about the market. In addition, they analyze how investor sentiment affects the aggregate market and investors’ trading behavior. The results show that the index predicts a positive future return reversal after 3 weeks, a temporary increase in volatility, and a shift in fund preferences from equity funds to money market funds that reverses after 3 weeks. Furthermore, an increase in the authors’ index coincides with individuals selling KOSDAQ-listed stocks and buying KOSPI-listed, large, or growth stocks but reversing course after 3 weeks in and out of sample. Furthermore, this study provides evidence that the authors’ sentiment index does not Granger-cause institutions’ attitudes but does Granger-cause individuals’ attitudes. Journal: Journal of Behavioral Finance Pages: 316-338 Issue: 3 Volume: 20 Year: 2019 Month: 7 X-DOI: 10.1080/15427560.2018.1511561 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1511561 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:3:p:316-338 Template-Type: ReDIF-Article 1.0 Author-Name: Robert B. Durand Author-X-Name-First: Robert B. Author-X-Name-Last: Durand Author-Name: Lucia Fung Author-X-Name-First: Lucia Author-X-Name-Last: Fung Author-Name: Manapon Limkriangkrai Author-X-Name-First: Manapon Author-X-Name-Last: Limkriangkrai Title: Myopic Loss Aversion, Personality, and Gender Abstract: Investor propensity to exhibit myopic loss aversion (MLA) varies. The authors’ analysis, which follows and extends the experimental design of Gneezy and Potters [1997] and Haigh and List [2005], finds that extraversion, one of Norman’s Big 5 personality traits, is associated with variation in subjects’ MLA. Extraversion, a trait positively associated with risk, reduces MLA. There is also some indication that neuroticism seems to have a positive association with MLA. Gender does not appear to have robust association with MLA. The study findings suggest that it may be advantageous to use readily measurable psychological constructs rather than gender per se in both experimental and field research. Journal: Journal of Behavioral Finance Pages: 339-353 Issue: 3 Volume: 20 Year: 2019 Month: 7 X-DOI: 10.1080/15427560.2018.1511562 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1511562 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:3:p:339-353 Template-Type: ReDIF-Article 1.0 Author-Name: Kevin Brady Author-X-Name-First: Kevin Author-X-Name-Last: Brady Author-Name: Arjan Premti Author-X-Name-First: Arjan Author-X-Name-Last: Premti Title: How Do Investors Determine Stock Prices after Large Price Shocks? Abstract: Most large stock price shocks are not accompanied by publicly available information. Then, what other information do investors use to set prices? The authors find that investors rely on reference points and their private information signals. Stocks closer to their 52-week high (52-week low) have negative (positive) returns in the days that follow a large negative (positive) price shock. These results suggest that investors anchor to these reference points and underreact on the event day. The authors also find that future returns drift in the direction of the shock when the stocks’ abnormal returns before the shock are in the opposite direction. Journal: Journal of Behavioral Finance Pages: 354-368 Issue: 3 Volume: 20 Year: 2019 Month: 7 X-DOI: 10.1080/15427560.2018.1511563 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1511563 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:3:p:354-368 Template-Type: ReDIF-Article 1.0 Author-Name: Tzu-Lun Huang Author-X-Name-First: Tzu-Lun Author-X-Name-Last: Huang Title: The Chinese Media Effect in Bull and Bear Markets Abstract: Current studies on the media effect fail to reach a consistent conclusion in a global setting. Lacking independence and highly controlled, the media functions differently in China and exerts unexpected influences on capital markets. Focusing on listed companies in China, the author analyzes the media effect on stock returns and further considers market states. Using a comprehensive database on firm-related news stories, stocks with high media coverage are found to possess higher stock returns, Jensen's alphas, and Daniel et al. [1997] adjusted returns over the 2007–2014 sample period. Moreover, the media effect is stronger in bull markets than in bear markets. The result is robust to model settings, alternative definitions of market states, estimation methods, portfolio formation, and sample selection. The study contributes to the literature by advancing the understanding of the Chinese media effect in bull and bear markets. Journal: Journal of Behavioral Finance Pages: 369-383 Issue: 3 Volume: 20 Year: 2019 Month: 7 X-DOI: 10.1080/15427560.2018.1513405 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1513405 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:3:p:369-383 Template-Type: ReDIF-Article 1.0 Author-Name: Ali Akansu Author-X-Name-First: Ali Author-X-Name-Last: Akansu Author-Name: James Cicon Author-X-Name-First: James Author-X-Name-Last: Cicon Author-Name: Stephen P. Ferris Author-X-Name-First: Stephen P. Author-X-Name-Last: Ferris Author-Name: Yanjia Sun Author-X-Name-First: Yanjia Author-X-Name-Last: Sun Title: Firm Performance in the Face of Fear: How CEO Moods Affect Firm Performance Abstract: The authors use facial emotion recognition software to quantify CEO mood. Anger or disgust motivates a CEO to work harder to improve his or her situation; thus firm profitability improves in the subsequent quarter. Happy CEOs are less likely to work on hard or unpleasant tasks; thus profitability decreases in the subsequent quarter. In the short term, fear explains the firm's announcement period market performance. However, fear is transient and performance improvement is short term. Journal: Journal of Behavioral Finance Pages: 373-389 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1338704 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1338704 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:373-389 Template-Type: ReDIF-Article 1.0 Author-Name: Xuewu (Wesley) Wang Author-X-Name-First: Xuewu (Wesley) Author-X-Name-Last: Wang Title: Investor Attention Strategy Abstract: This article documents the motivation, the construction, and the profitability of an investment strategy based on investor attention in the options market. Using the option volume after a 1-week dormant period as a proxy for investor attention, the author shows that heightened investor attention after the dormant period has rich investment implications. A portfolio constructed on the basis of volume spike events immediately after the dormant period generates an abnormal return of 68 basis points on a monthly basis (8.16% on an annualized basis). This abnormal return is robust to risk adjustment using standard asset pricing models. The author's findings constitute strong evidence that it is profitable for outside investors to mimic attentive investors in the options market and reap economically and statistically significant profits. Journal: Journal of Behavioral Finance Pages: 390-399 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1344674 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1344674 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:390-399 Template-Type: ReDIF-Article 1.0 Author-Name: Maria-Miruna Pochea Author-X-Name-First: Maria-Miruna Author-X-Name-Last: Pochea Author-Name: Angela-Maria Filip Author-X-Name-First: Angela-Maria Author-X-Name-Last: Filip Author-Name: Andreea-Maria Pece Author-X-Name-First: Andreea-Maria Author-X-Name-Last: Pece Title: Herding Behavior in CEE Stock Markets Under Asymmetric Conditions: A Quantile Regression Analysis Abstract: This article investigates herding behavior in ten Central and East European (CEE) stock markets by using daily data on stock prices for 384 companies from January 2, 2003, to December 31, 2013. Our study is based on the methodology developed by Chang, Cheng, and Khorana [2000], adapted to detect herding behavior under different market conditions. The authors use quantile regression analysis as an estimation method and find evidence of herding behavior in all CEE countries, except for Poland and Romania. When the market is up and the trading volume increases, investors become enthusiastic and optimistic, neglecting their own information and following each other in buying transactions. Conversely, when the market declines, driven by panic and fear, investors follow the market consensus and engage in overselling transactions. Journal: Journal of Behavioral Finance Pages: 400-416 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1344677 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1344677 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:400-416 Template-Type: ReDIF-Article 1.0 Author-Name: Nicholas Mangee Author-X-Name-First: Nicholas Author-X-Name-Last: Mangee Title: New Evidence on Psychology and Stock Returns Abstract: This article provides econometric evidence on the importance of psychological considerations for aggregate stock price fluctuations. To this end, a novel measure of stock market sentiment, dubbed the Net Psychology Index (NPI), based on information contained in Bloomberg News's end-of-the-day stock market reports, is confronted with a battery of multivariate empirical analyses. Results suggest that NPI is statistically different from popular sentiment proxies within the literature. NPI exhibits predictive power, increasing stock returns in the short run with this impact dissipating in the medium term. NPI does not exhibit asymmetric effects on returns for size- and momentum-related portfolios. A trading strategy based on NPI generates a statistically significant positive monthly return. Recursive out-of-sample fit analyses report a lower standard deviation of forecasting errors for NPI-based returns models versus competing accounts. Journal: Journal of Behavioral Finance Pages: 417-426 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1344676 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1344676 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:417-426 Template-Type: ReDIF-Article 1.0 Author-Name: Chueh-Yung Tsao Author-X-Name-First: Chueh-Yung Author-X-Name-Last: Tsao Author-Name: Chun I Lee Author-X-Name-First: Chun I Author-X-Name-Last: Lee Author-Name: Yih-Wen Shyu Author-X-Name-First: Yih-Wen Author-X-Name-Last: Shyu Title: Crossing of Psychological Price Levels: The Price Dynamics and Interaction between S&P500 Index and Index Futures Abstract: The authors provide fresh evidence on the nonfundamental-driven price dynamics and interaction between index and index futures by examining the price movements of the S&P500 index and index futures surrounding the crossing of the 00 psychological barriers and 52-week highs and lows. In contrast to the extant evidence that futures leads in fundamental-driven price movements, the authors show the dominance of the crossing in the index in continuing the price trend after the crossing. Even when synchronized crossings occur, the index rises more than the index futures during upward crossings, whereas the index futures falls more than the index during downward crossings. While volatility is significantly reduced before upward crossings, but not for downward crossings, it is significantly higher during the crossing, and significantly lower after the crossings in both markets. These findings have clear practical implications for index arbitrageurs, investors, and regulators. Journal: Journal of Behavioral Finance Pages: 427-447 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1344675 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1344675 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:427-447 Template-Type: ReDIF-Article 1.0 Author-Name: Terence Tai-Leung Chong Author-X-Name-First: Terence Tai-Leung Author-X-Name-Last: Chong Author-Name: Xiaojin Liu Author-X-Name-First: Xiaojin Author-X-Name-Last: Liu Author-Name: Chenqi Zhu Author-X-Name-First: Chenqi Author-X-Name-Last: Zhu Title: What Explains Herd Behavior in the Chinese Stock Market? Abstract: This article examines the causes of herd behavior in the Chinese stock market. Using the nonlinear model of Chang, Cheng, and Khorana [2000], the authors of this article find robust evidence of herding in both the up and down markets. They contribute to the existing literature by exploring the underlying reasons for herding in China. It is shown that analyst recommendation, short-term investor horizon, and risk are the principal causes of herding. However, the authors cannot find evidence that relates herding to firm size, nor can they detect significant differences in herding between state-owned enterprises and non–state-owned enterprises. Journal: Journal of Behavioral Finance Pages: 448-456 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1365365 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1365365 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:448-456 Template-Type: ReDIF-Article 1.0 Author-Name: Paresh Kumar Narayan Author-X-Name-First: Paresh Kumar Author-X-Name-Last: Narayan Author-Name: Kumari Ranjeeni Author-X-Name-First: Kumari Author-X-Name-Last: Ranjeeni Author-Name: Deepa Bannigidadmath Author-X-Name-First: Deepa Author-X-Name-Last: Bannigidadmath Title: New Evidence of Psychological Barrier from the Oil Market Abstract: The authors examine how stock returns were affected when the oil price reached the psychological barrier of US$100 per barrel for the first time in history. Using an event study approach, 4 key results emerge. First, the authors show that a psychological barrier event in the oil market does affect stock returns. Second, they show that a psychological barrier event in the oil market is a source of return drift—a phenomenon well explained and understood with respect to nonoil news events. Third, the psychological barrier affects small/medium-sized stocks and not large stocks. Last, the authors show that successful trading strategies can be devised based on the information that the oil price psychological barrier significantly impacts the market and that it contributes to return drift. Journal: Journal of Behavioral Finance Pages: 457-469 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1365235 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1365235 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:457-469 Template-Type: ReDIF-Article 1.0 Author-Name: Meir Statman Author-X-Name-First: Meir Author-X-Name-Last: Statman Title: Financial Advertising in the Second Generation of Behavioral Finance Abstract: Financial economists writing about financial advertising often describe them as fluff at best and misleading or fraudulent at worst. This description typifies the first generation of behavioral finance that described people as irrational, misled by ads into cognitive and emotional errors. The second generation of behavioral finance describes people as normal. It acknowledges the full range of people's normal wants and distinguishes wants from errors. Some financial ads exploit errors, whereas others cater to wants. Our wants include the utilitarian, expressive, and emotional benefits of riches and protection from poverty, nurturing our children and families, playing games and winning, staying true to our values, gaining respect and high social status, promoting fairness, paying no taxes, and more. Journal: Journal of Behavioral Finance Pages: 470-477 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1365236 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1365236 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:470-477 Template-Type: ReDIF-Article 1.0 Author-Name: Stavros Stavroyiannis Author-X-Name-First: Stavros Author-X-Name-Last: Stavroyiannis Author-Name: Vassilios Babalos Author-X-Name-First: Vassilios Author-X-Name-Last: Babalos Title: Herding, Faith-Based Investments and the Global Financial Crisis: Empirical Evidence From Static and Dynamic Models Abstract: The purpose for this article is to explore the existence of herding behavior in the context of Shariah-based ethical investments. To this end the authors have employed the highly liquid constituent stocks of the U.S. Dow Jones Islamic Index for the period January 2007 to December 2014. The methodology encompasses both static and dynamic models that capture potential time-varying patterns or asymmetric behavior of herding. Summarizing the results, the authors document significant antiherding behavior that is robust across different formulations and testing procedures. Most interestingly, they observe an asymmetric behavior of the antiherding phenomenon. Results from the dynamic analysis reveal that antiherding tends to be more intense during turbulent periods. The findings may entail useful implications for investors who wish to diversify their portfolios using faith-based investments. Journal: Journal of Behavioral Finance Pages: 478-489 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1365366 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1365366 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:478-489 Template-Type: ReDIF-Article 1.0 Author-Name: The Editors Title: Erratum Journal: Journal of Behavioral Finance Pages: 490-490 Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1363535 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1363535 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:490-490 Template-Type: ReDIF-Article 1.0 Author-Name: The Editors Title: EOV Editorial Board Journal: Journal of Behavioral Finance Pages: ebi-ebi Issue: 4 Volume: 18 Year: 2017 Month: 10 X-DOI: 10.1080/15427560.2017.1396813 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1396813 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:4:p:ebi-ebi Template-Type: ReDIF-Article 1.0 Author-Name: James C. Brau Author-X-Name-First: James C. Author-X-Name-Last: Brau Author-Name: James Cicon Author-X-Name-First: James Author-X-Name-Last: Cicon Author-Name: Grant McQueen Author-X-Name-First: Grant Author-X-Name-Last: McQueen Title: Soft Strategic Information and IPO Underpricing Abstract: Using content analysis, we measure the impact of soft information, derived from words in initial public offering (IPO) registration documents, on IPO pricing efficiency. First, using 2,298 U.S. IPOs from 1996–2008, we find that an IPO document's strategic tone correlates positively with the stock's first-day return; more frequent usage of positive and/or less frequent usage of negative strategic words leads to more IPO underpricing. Second, we find that an IPO document's strategic tone is negatively correlated with the stock's long-run return. Together, these findings imply that investors initially misprice soft information in registration statements, which mispricing is eventually corrected. Additionally, we create new content-analysis libraries for strategic words and introduce a survey-based library creation method and word-weighting system. Journal: Journal of Behavioral Finance Pages: 1-17 Issue: 1 Volume: 17 Year: 2016 Month: 1 X-DOI: 10.1080/15427560.2016.1133619 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1133619 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:1:p:1-17 Template-Type: ReDIF-Article 1.0 Author-Name: Antti Klemola Author-X-Name-First: Antti Author-X-Name-Last: Klemola Author-Name: Jussi Nikkinen Author-X-Name-First: Jussi Author-X-Name-Last: Nikkinen Author-Name: Jarkko Peltomäki Author-X-Name-First: Jarkko Author-X-Name-Last: Peltomäki Title: Changes in Investors' Market Attention and Near-Term Stock Market Returns Abstract: We use Google Search volume to track changes investors' positive and negative market attention. Our results support the hypothesis that this information reflects investors' optimistic and pessimistic anticipation and can be used to predict near-term future returns. We find that changes in negative search term volume of “market crash” and “bear market” and changes in positive search term volume “market rally” explain near-term stock returns. Changes in investors' attention are partly related to past stock market returns, implying that investors are prone to pay attention to possible price reversals. These measures of market attention are potential gauges of investor sentiment. Journal: Journal of Behavioral Finance Pages: 18-30 Issue: 1 Volume: 17 Year: 2016 Month: 1 X-DOI: 10.1080/15427560.2016.1133620 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1133620 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:1:p:18-30 Template-Type: ReDIF-Article 1.0 Author-Name: Lisa Koonce Author-X-Name-First: Lisa Author-X-Name-Last: Koonce Author-Name: Nick Seybert Author-X-Name-First: Nick Author-X-Name-Last: Seybert Author-Name: James Smith Author-X-Name-First: James Author-X-Name-Last: Smith Title: Management Speaks, Investors Listen: Are Investors Too Focused on Managerial Disclosures? Abstract: Market regulators are concerned about the completeness of management-provided explanations in financial reports and other venues. In particular, the Securities and Exchange Commission has articulated the growing problem of firm managers selectively emphasizing information that is favorable to their firm's financial status. In this two-experiment study, we examine whether investors are adversely influenced when firm managers provide only a partial explanation for a firm's financial outcomes, even though the investors have information about all of the causes for a firm's financial outcomes. Our results reveal that investors are misled by partial management explanations. We demonstrate that this effect occurs in situation both when qualitative information is known about the causes and when quantitative information is known about the causes. We document that one way in which this overreliance on management-provided partial information can be mitigated is when investors are provided with a quantitative analysis of the management explanation; with this quantitative analysis we observe that investors are able to distinguish between partial and complete explanations. Our study has implications for regulators and researchers. Journal: Journal of Behavioral Finance Pages: 31-44 Issue: 1 Volume: 17 Year: 2016 Month: 1 X-DOI: 10.1080/15427560.2016.1133623 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1133623 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:1:p:31-44 Template-Type: ReDIF-Article 1.0 Author-Name: Xian Li Author-X-Name-First: Xian Author-X-Name-Last: Li Author-Name: James A. Hendler Author-X-Name-First: James A. Author-X-Name-Last: Hendler Author-Name: John L. Teall Author-X-Name-First: John L. Author-X-Name-Last: Teall Title: Investor Attention on the Social Web Abstract: We study investor attention through practitioners' tweeting behaviors. We develop formalisms of “cognitive niches,” heuristics from adaptive cognitive control, to account for the selectivity of investor attention. Using asset-specific tweets as direct measures of investor attention, we find evidence supporting contextual cognitive control, depending on asset types, investors' experience and investing approaches. We quantify attention contagion arising from the “social proof” heuristic, whereby the drawing power of the crowd in directing investor attention exceeds that of firm fundamentals. Finally, we demonstrate that different natures of investor attention (active or passive) reveals distinct patterns of trading volume, returns and volatility. Journal: Journal of Behavioral Finance Pages: 45-59 Issue: 1 Volume: 17 Year: 2016 Month: 1 X-DOI: 10.1080/15427560.2015.1095752 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1095752 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:1:p:45-59 Template-Type: ReDIF-Article 1.0 Author-Name: F. Douglas Foster Author-X-Name-First: F. Douglas Author-X-Name-Last: Foster Author-Name: Geoffrey J. Warren Author-X-Name-First: Geoffrey J. Author-X-Name-Last: Warren Title: Interviews with Institutional Investors: The How and Why of Active Investing Abstract: We interview professional institutional investors to learn how they choose between active and passive management, select active equity managers and construct multi-manager portfolios. We find that many of the aspects emphasized in the fund management literature, such as returns generated by the average manager and emphasis on past performance, play a relatively minor role in decisions. In contrast, judgment is found to play a central role, particularly the evaluation of people when selecting managers, the role of confidence in retaining managers, and self-perceptions about capability to identify skilled managers. Past performance is not taken at face value, but analyzed to understand underlying sources of returns. Stated reasons for preferring active management relate to whether a handful of skilled active managers can be identified and combined to generate a better expected portfolio outcome; and are only vaguely associated with the performance of the average manager. Journal: Journal of Behavioral Finance Pages: 60-84 Issue: 1 Volume: 17 Year: 2016 Month: 1 X-DOI: 10.1080/15427560.2015.1095754 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1095754 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:1:p:60-84 Template-Type: ReDIF-Article 1.0 Author-Name: Olivier Mesly Author-X-Name-First: Olivier Author-X-Name-Last: Mesly Author-Name: David Tessier Author-X-Name-First: David Author-X-Name-Last: Tessier Title: Psychological Points of Equilibrium in Asset Valuation During Market Bubbles Abstract: This paper presents the concept of psychological point of equilibrium (PPE), which is a mental state achieved by average investors when trying to make decisions during market bubble's inflationary stages. The PPE results from an interplay between agents acting in a volatile market that is characterized by predatory behaviors. Prior to the 2008 subprime crisis, average investors are assumed to have displaced their logical PPEs in large part as a consequence of their attraction towards predatory mortgages and teaser rates. A better understanding of average investor's vulnerabilities may help governments to implement more efficient measures aimed at curving predatory behaviors. Journal: Journal of Behavioral Finance Pages: 85-98 Issue: 1 Volume: 17 Year: 2016 Month: 1 X-DOI: 10.1080/15427560.2015.1098641 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1098641 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:1:p:85-98 Template-Type: ReDIF-Article 1.0 Author-Name: David W. Johnk Author-X-Name-First: David Author-X-Name-Last: W. Johnk Author-Name: Gökçe Soydemir Author-X-Name-First: Gökçe Author-X-Name-Last: Soydemir Title: Time-Varying Market Price of Risk and Investor Sentiment: Evidence from a Multivariate GARCH Model Abstract: We test a conditional version of the CAPM in the U.S. equity market using a parsimonious generalized autoregressive conditional heteroskedasticity (GARCH) model in which the risk premia, betas, and correlations vary through time. We introduce U.S. investor sentiment from two surveys as conditional information variables, whereas previous studies generally use economic fundamentals. We assume that investor sentiment is not entirely irrational and decompose it into its irrational and rational components; using the irrational components as information variables. We find that irrational investor sentiment measures are statistically significant, and contain information which may be valuable in asset pricing models. Journal: Journal of Behavioral Finance Pages: 105-119 Issue: 2 Volume: 16 Year: 2015 Month: 4 X-DOI: 10.1080/15427560.2015.1034856 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1034856 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:2:p:105-119 Template-Type: ReDIF-Article 1.0 Author-Name: Julie R. Agnew Author-X-Name-First: Julie R. Author-X-Name-Last: Agnew Author-Name: Lisa R. Anderson Author-X-Name-First: Lisa R. Author-X-Name-Last: Anderson Author-Name: Lisa R. Szykman Author-X-Name-First: Lisa R. Author-X-Name-Last: Szykman Title: An Experimental Study of the Effect of Market Performance on Annuitization and Equity Allocations Abstract: Although researchers have studied the annuity puzzle for years, it has only recently been analyzed from a behavioral finance standpoint. This paper adds to this new stream of literature by using experimental methods to investigate how market performance affects the decision to annuitize. Using a large-scale, controlled laboratory experiment, this paper finds evidence that excessive extrapolation may be influencing this decision. In addition, we find that past market performance influences subsequent portfolio allocation decisions. This paper serves as a useful complement to recent studies using administrative data. Our experimental approach allows us to more cleanly test the role of past market performance by carefully controlling for many factors that may confound the analysis of administrative data. Journal: Journal of Behavioral Finance Pages: 120-129 Issue: 2 Volume: 16 Year: 2015 Month: 4 X-DOI: 10.1080/15427560.2015.1034857 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1034857 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:2:p:120-129 Template-Type: ReDIF-Article 1.0 Author-Name: Dawn M. Dobni Author-X-Name-First: Dawn M. Author-X-Name-Last: Dobni Author-Name: Marie D. Racine Author-X-Name-First: Marie Author-X-Name-Last: D. Racine Title: Stock Market Image: The Good, the Bad, and the Ugly Abstract: This paper introduces the concept of stock market image and presents a six-dimension scale for measuring it. Using cross-sectional survey data, application of the scale reveals that retail investors have widely heterogeneous perceptions of the stock market ranging from highly positive to highly negative. Five image profiles were generated using cluster analysis, each representing a different perspective on the stock market. These profiles were found to reflect personal and subjective characteristics of investors, including financial knowledge and investing experience. Understanding stock market image is important because it influences investing behaviors, expectations, and experiences, including the decision to participate in or avoid equities markets. Members of the stock market supply chain are thus encouraged to consider their roles and responsibilities in managing, promoting, and improving it. Journal: Journal of Behavioral Finance Pages: 130-139 Issue: 2 Volume: 16 Year: 2015 Month: 4 X-DOI: 10.1080/15427560.2015.1034858 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1034858 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:2:p:130-139 Template-Type: ReDIF-Article 1.0 Author-Name: Eben Otuteye Author-X-Name-First: Eben Author-X-Name-Last: Otuteye Author-Name: Mohammad Siddiquee Author-X-Name-First: Mohammad Author-X-Name-Last: Siddiquee Title: Overcoming Cognitive Biases: A Heuristic for Making Value Investing Decisions Abstract: Investment decisions are subject to error due to cognitive biases of the decision makers. One method for preventing cognitive biases from influencing decisions is to specify the algorithm for the decision in advance and to apply it dispassionately. Heuristics are useful practical tools for simplifying decision making in a complex environment due to uncertainty, limited information and bounded rationality. We develop a simple heuristic for making value investing decisions based on profitability, financial stability, susceptibility to bankruptcy, and margin of safety. This achieves two goals. First, it simplifies the decision making process without compromising quality, and second, it enables the decision maker to avoid potential cognitive bias problems. Journal: Journal of Behavioral Finance Pages: 140-149 Issue: 2 Volume: 16 Year: 2015 Month: 4 X-DOI: 10.1080/15427560.2015.1034859 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1034859 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:2:p:140-149 Template-Type: ReDIF-Article 1.0 Author-Name: Flavio Bazzana Author-X-Name-First: Flavio Author-X-Name-Last: Bazzana Author-Name: Luigi Mittone Author-X-Name-First: Luigi Author-X-Name-Last: Mittone Author-Name: Luciano Andreozzi Author-X-Name-First: Luciano Author-X-Name-Last: Andreozzi Title: The Freeze-out Bond Exchange Offer: An Experimental Approach Abstract: If a firm wants to withdraw a covenant on a issued bond, it can attempt a consent solicitation combined with an exchange offer (the freeze-out exchange offer). If the bondholders are not fully coordinated, the shareholders can make the exchange offer unfair by issuing the new bond at a price that is lower than the market price. We perform two experiments to isolate (i) the level of information and (ii) the role of the experience of the bondholders in a freeze-out bond exchange offer. In the first experiment, the experience of the participants is a dominant factor compared to access to information. The choice of the symmetric Nash equilibrium, in which every participant accepts the exchange offer, increases with experience. Conversely, in the second experiment, which offers a lower level of experience, the information provided is the dominant factor. In this experiment relative to the first one, the choice of the symmetric Nash equilibria decreases, and the choice of the Pareto superior asymmetric Nash equilibrium, in which two participants reject the exchange offer and the other accepts it, increases. These results have policy implications that may affect exchange offers in the bond market. Journal: Journal of Behavioral Finance Pages: 150-162 Issue: 2 Volume: 16 Year: 2015 Month: 4 X-DOI: 10.1080/15427560.2015.1034860 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1034860 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:2:p:150-162 Template-Type: ReDIF-Article 1.0 Author-Name: Jan Viebig Author-X-Name-First: Jan Author-X-Name-Last: Viebig Title: Are Emerging Market Investors Overly Pessimistic in Extreme Risk-off Periods? Abstract: Motivated by Campbell and Shiller [2001], we ask if future returns and loss probabilities are predictable when markets trade at extremely low, depressed levels. In this paper we present empirical evidence that a predictable “undershooting phenomenon” exists in emerging markets. Depressed valuation ratios are a statistically significant predictor at the 99% level of confidence for future returns in most emerging markets. Overly anxious emerging market investors seem to overreact in periods of extreme stress and fear in financial markets. Journal: Journal of Behavioral Finance Pages: 163-172 Issue: 2 Volume: 16 Year: 2015 Month: 4 X-DOI: 10.1080/15427560.2015.1034861 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1034861 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:2:p:163-172 Template-Type: ReDIF-Article 1.0 Author-Name: Maria Hartwig Author-X-Name-First: Maria Author-X-Name-Last: Hartwig Author-Name: Jason A. Voss Author-X-Name-First: Jason A. Author-X-Name-Last: Voss Author-Name: D. Brian Wallace Author-X-Name-First: D. Brian Author-X-Name-Last: Wallace Title: Detecting Lies in the Financial Industry: A Survey of Investment Professionals' Beliefs Abstract: Research suggests that interpersonal deception is a common phenomenon in many settings. However, to date no research has examined lying and lie detection in the financial industry. This paper presents an empirical examination of investment professionals' beliefs about deception. We obtained survey data from 607 CFA Institute charter holders across the world. Three aspects of deception were included in the survey. First, respondents' beliefs about the behavioral characteristics of lying were examined. Second, perceptions of the prevalence of lies in professional and everyday life were mapped. Third, respondents were asked to estimate their ability to distinguish between lies and truths. The results showed that respondents subscribed to common misconceptions about deceptive behavior, in particular the beliefs that liars are gaze aversive and fidgety. Respondents believed that lying occurs on a daily basis, and that their accuracy in detecting lies exceeds 65%. Previous research suggests that this estimate may be overconfident. Implications of these results and directions for future research on deception in the financial industry are discussed. Journal: Journal of Behavioral Finance Pages: 173-182 Issue: 2 Volume: 16 Year: 2015 Month: 4 X-DOI: 10.1080/15427560.2015.1034862 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1034862 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:2:p:173-182 Template-Type: ReDIF-Article 1.0 Author-Name: Debapriya Jojo Paul Author-X-Name-First: Debapriya Jojo Author-X-Name-Last: Paul Author-Name: Julia Henker Author-X-Name-First: Julia Author-X-Name-Last: Henker Author-Name: Sian Owen Author-X-Name-First: Sian Author-X-Name-Last: Owen Title: Asset Legitimacy in Experimental Asset Markets Abstract: We investigate whether prices in experimental asset markets behave differently when participants are required to trade with earned wealth compared to unearned wealth. Unearned endowed wealth, the standard practice in experimental studies of asset price bubbles, may elicit greater than normal risk-seeking behavior. We test for this altered behavior by requiring some participants to earn their initial market allocation. We do not find a significant difference in the frequency, severity, or duration of mispricing between earned and unearned endowments. Our results confirm the validity of the existing methodologies used in the study of bubbles in experimental settings. Journal: Journal of Behavioral Finance Pages: 183-198 Issue: 2 Volume: 16 Year: 2015 Month: 4 X-DOI: 10.1080/15427560.2015.1034863 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1034863 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:2:p:183-198 Template-Type: ReDIF-Article 1.0 Author-Name: Luiz Félix Author-X-Name-First: Luiz Author-X-Name-Last: Félix Author-Name: Roman Kräussl Author-X-Name-First: Roman Author-X-Name-Last: Kräussl Author-Name: Philip Stork Author-X-Name-First: Philip Author-X-Name-Last: Stork Title: Single Stock Call Options as Lottery Tickets: Overpricing and Investor Sentiment Abstract: The authors investigate whether the overpricing of out-of-the money single stock calls can be explained by Tversky and Kahneman's [1992] cumulative prospect theory (CPT). They hypothesize that these options are expensive because investors overweight small probability events and overpay for positively skewed securities (i.e., lottery tickets). The authors find that overweighting of small probabilities embedded in the CPT explains the richness of out-of-the money single stock calls better than other utility functions. Nevertheless, overweighting of small probabilities events is less pronounced than suggested by the CPT, is strongly time varying, and most frequent in options of short maturity. The authors find that fluctuations in overweighting of small probabilities are largely explained by the sentiment factor. Journal: Journal of Behavioral Finance Pages: 385-407 Issue: 4 Volume: 20 Year: 2019 Month: 10 X-DOI: 10.1080/15427560.2018.1511792 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1511792 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:4:p:385-407 Template-Type: ReDIF-Article 1.0 Author-Name: Stephen Bahadar Author-X-Name-First: Stephen Author-X-Name-Last: Bahadar Author-Name: Haroon Mahmood Author-X-Name-First: Haroon Author-X-Name-Last: Mahmood Author-Name: Rashid Zaman Author-X-Name-First: Rashid Author-X-Name-Last: Zaman Title: The Herds of Bulls and Bears in Leveraged ETF Market Abstract: The authors investigate the unexplored herding behavior of investors in a leveraged exchange-traded funds (LETFs) market by examining U.S.-listed LETFs, which offers both long and short positions with target return multiples (such as +2x) and inverse multiples (e.g., –1x and –2x) of the tracking indices in the form of bull and bear LETFs, respectively. Overall findings reveal the presence of significant herding behavior in LETFs. More specifically, herding is prominent in bear LETFs during daily trading, asymmetric market conditions (e.g., rising/declining market return, trading volume, trading volatility), and the global financial crisis period. Further, herding is found to be spurious during the normal trading days in the LETFs market but during the global financial crisis, herding occurs in response to the non-fundamental factors. Journal: Journal of Behavioral Finance Pages: 408-423 Issue: 4 Volume: 20 Year: 2019 Month: 10 X-DOI: 10.1080/15427560.2019.1553177 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1553177 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:4:p:408-423 Template-Type: ReDIF-Article 1.0 Author-Name: Priyank Gandhi Author-X-Name-First: Priyank Author-X-Name-Last: Gandhi Author-Name: Tim Loughran Author-X-Name-First: Tim Author-X-Name-Last: Loughran Author-Name: Bill McDonald Author-X-Name-First: Bill Author-X-Name-Last: McDonald Title: Using Annual Report Sentiment as a Proxy for Financial Distress in U.S. Banks Abstract: Current measures of bank distress find marginal value in predictive variables beyond a capital adequacy ratio and tend to miss extreme events impacting the entire sector. The authors advocate a new proxy for bank distress: sentiment measures from banks’ annual reports. After controlling for popular forecasting variables used in the literature, they find that more negative sentiment in the annual report is associated with larger delisting probabilities, lower odds of paying subsequent dividends, higher subsequent loan loss provisions, and lower future return on assets. The findings suggest that regulators could augment current early warning systems for banks and the banking sector—where the measures are based exclusively on financial statement data—by using the frequency of negative words in banks’ annual reports. Journal: Journal of Behavioral Finance Pages: 424-436 Issue: 4 Volume: 20 Year: 2019 Month: 10 X-DOI: 10.1080/15427560.2019.1553176 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1553176 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:4:p:424-436 Template-Type: ReDIF-Article 1.0 Author-Name: Jodonnis Rodriguez Author-X-Name-First: Jodonnis Author-X-Name-Last: Rodriguez Author-Name: Edward R. Lawrence Author-X-Name-First: Edward R. Author-X-Name-Last: Lawrence Title: Institutional Investment Patterns in Gender-Diverse Firms Abstract: The authors examine the relationship between board gender diversity and institutional ownership. They find that firms with more gender diversity tend to have lower holdings of institutional ownership. The results are similar for various types of institutions such as banks, insurance-related companies, and mutual funds. Additionally, the authors find that institutional investors have lower investments in gender-diverse firms with higher institutional following and vice versa. The present results may be driven by the richer information environments and the informativeness of stock prices in gender-diverse firms. Journal: Journal of Behavioral Finance Pages: 437-450 Issue: 4 Volume: 20 Year: 2019 Month: 10 X-DOI: 10.1080/15427560.2019.1554574 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1554574 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:4:p:437-450 Template-Type: ReDIF-Article 1.0 Author-Name: Yaseen S. Alhaj-Yaseen Author-X-Name-First: Yaseen S. Author-X-Name-Last: Alhaj-Yaseen Author-Name: Xi Rao Author-X-Name-First: Xi Author-X-Name-Last: Rao Title: Does Asymmetric Information Drive Herding? An Empirical Analysis Abstract: The authors explore the relative significance of information and its role in herding formation among investors. They investigate this relationship at 3 scales: the market, investor, and individual stock levels. At the aggregate market level, empirical evidence obtained suggests that a more transparent environment is likely to mitigate the extent of herding intensity, mainly as a result of a decay in non–information-based “intentional” herding. At the investor level, the authors find strong evidence of asymmetric herding between investors with heterogenous information (arbitragers and noise traders). Finally, at the stock individual level, the present results show a positive and statistically significant relationship between herding intensity and 5 firm-specific measures of information asymmetry. Journal: Journal of Behavioral Finance Pages: 451-470 Issue: 4 Volume: 20 Year: 2019 Month: 10 X-DOI: 10.1080/15427560.2019.1573822 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1573822 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:4:p:451-470 Template-Type: ReDIF-Article 1.0 Author-Name: Adam C. Harper Author-X-Name-First: Adam C. Author-X-Name-Last: Harper Author-Name: Salil K. Sarkar Author-X-Name-First: Salil K. Author-X-Name-Last: Sarkar Title: Option Market Signals and the Disposition Effect Around Equity Earnings Announcements Abstract: The authors provide evidence that equity traders who miss or ignore signals from the options market have an increased disposition to hold their loser positions following earnings announcements. Postearnings equity returns that (do not) align with pre-earnings options market signals are fast (slow) to return to ordinary levels. We attribute this to the disposition effect arising from overconfident traders. The authors furthermore show an enhanced positive relationship between postearnings equity returns and option-implied volatility spreads when those spreads are driven by deep out-of-the-money options, which we attribute to the existence of private information. Journal: Journal of Behavioral Finance Pages: 471-489 Issue: 4 Volume: 20 Year: 2019 Month: 10 X-DOI: 10.1080/15427560.2019.1575385 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1575385 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:4:p:471-489 Template-Type: ReDIF-Article 1.0 Author-Name: Ruihai Li Author-X-Name-First: Ruihai Author-X-Name-Last: Li Author-Name: Xuewu (Wesley) Wang Author-X-Name-First: Xuewu (Wesley) Author-X-Name-Last: Wang Author-Name: Zhipeng Yan Author-X-Name-First: Zhipeng Author-X-Name-Last: Yan Author-Name: Yan Zhao Author-X-Name-First: Yan Author-X-Name-Last: Zhao Title: Sophisticated Investor Attention and Market Reaction to Earnings Announcements: Evidence From the SEC’s EDGAR Log Files Abstract: The Securities and Exchange Commission’s (SEC) Electronic Data Gathering and Retrieval (EDGAR) log files provide a direct, powerful measure of attention from relatively sophisticated investors. The authors apply this measure to a sample of earnings announcements from 2003 to 2016. The authors find that the stock market is less surprised, and the post–earnings-announcement drift is weaker for earnings announcements receiving more preannouncement investor attention, measured in downloads by humans from EDGAR. The authors further show that it is profitable to utilize the different drift patterns. An attention-based portfolio without the SEC reporting lag that longs stocks with the lowest investor attention and most positive earnings surprises and shorts stocks with the lowest attention and most negative earnings surprises generates a statistically significant monthly alpha of 1.24% after adjusting for standard asset pricing factors. Journal: Journal of Behavioral Finance Pages: 490-503 Issue: 4 Volume: 20 Year: 2019 Month: 10 X-DOI: 10.1080/15427560.2019.1575829 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1575829 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:4:p:490-503 Template-Type: ReDIF-Article 1.0 Author-Name: Matthias W. Uhl Author-X-Name-First: Matthias W. Author-X-Name-Last: Uhl Title: Emotions Matter: Sentiment and Momentum in Foreign Exchange Abstract: The author introduces news sentiment as a variable that can explain and predict subsequent changes in the USD/EUR exchange rate and therefore close a gap in the foreign exchange literature. By applying the concept of frequency filtering from the domain of electrical engineering, the author shows an innovative way of filtering for noise not only in news sentiment, but also in price momentum. The author finds that news sentiment is not correlated to price momentum, and that trading strategies based on news sentiment achieve around twice as high information ratios (up to 0.9) than with trading strategies based on price momentum. Journal: Journal of Behavioral Finance Pages: 249-257 Issue: 3 Volume: 18 Year: 2017 Month: 7 X-DOI: 10.1080/15427560.2017.1332061 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1332061 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:3:p:249-257 Template-Type: ReDIF-Article 1.0 Author-Name: Seema Narayan Author-X-Name-First: Seema Author-X-Name-Last: Narayan Author-Name: Paresh Kumar Narayan Author-X-Name-First: Paresh Kumar Author-X-Name-Last: Narayan Title: Are Oil Price News Headlines Statistically and Economically Significant for Investors? Abstract: While much has been written about the effects of oil price on stock returns, surprisingly nothing is known about the effect of oil price news on stock returns. This article is a response to this research gap. For a large number of stocks on the New York Stock Exchange, the authors find that while oil price news does predict market returns it only predicts returns of some sectors and not all. They find that sorting stocks based on oil price news generates a significant return differential in the cross-section, which holds consistently across a range of models allowing for the well-known risk factors. Their findings suggest that information contained in oil price news affects stock returns. Journal: Journal of Behavioral Finance Pages: 258-270 Issue: 3 Volume: 18 Year: 2017 Month: 7 X-DOI: 10.1080/15427560.2017.1308942 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308942 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:3:p:258-270 Template-Type: ReDIF-Article 1.0 Author-Name: Robson Braga Author-X-Name-First: Robson Author-X-Name-Last: Braga Author-Name: Luiz Paulo Lopes Fávero Author-X-Name-First: Luiz Paulo Lopes Author-X-Name-Last: Fávero Title: Disposition Effect and Tolerance to Losses in Stock Investment Decisions: An Experimental Study Abstract: This study aims to verify whether people tolerate losses within the self-established limit through an experimental methodological procedure. In addition, it aims to analyze the decision behavior in terms of the time they take to realize gains and losses, as a way to test the manifestation of the disposition effect. The experiment consists in decision to sell stock from 4 companies, 2 with potentially negative returns and 2 with positive returns. The participants demonstrated that they accept more losses than they had attested they would bear in advance and manifested the typical disposition effect, under which people sell the winning stock earlier than the losing stock. There was no difference between men and women in the manifestation of the disposition effect, and women performed worse because they had established lower bearable losses and higher required gains in advance. Journal: Journal of Behavioral Finance Pages: 271-280 Issue: 3 Volume: 18 Year: 2017 Month: 7 X-DOI: 10.1080/15427560.2017.1308946 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308946 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:3:p:271-280 Template-Type: ReDIF-Article 1.0 Author-Name: Steven Huddart Author-X-Name-First: Steven Author-X-Name-Last: Huddart Author-Name: Abdullah Yavas Author-X-Name-First: Abdullah Author-X-Name-Last: Yavas Title: The Efficiency of Stock-Based Incentives: Experimental Evidence Abstract: The authors report the results of laboratory experiments in which subjects are offered contracts structured similar to equity compensation packages and result in subjects receiving cash payments that are a function of their effort and random factors. The authors compare the outcomes from alternative contractual forms to theoretical benchmarks and report the efficiency of the contracts to provide evidence on whether options or stocks that have same economic cost to the employer yield the same or different effort levels from the managers. Both contracts elicit lower levels of effort than would be chosen by an expected-payoff-maximizing decision maker. Effort choices under the option contract did not differ significantly from effort choices under the stock contract except for male subjects. The option contract elicits a higher effort level for these subjects and condition than the stock contract. Effort choices reflect loss aversion and regret based on past stock price realizations. Journal: Journal of Behavioral Finance Pages: 281-303 Issue: 3 Volume: 18 Year: 2017 Month: 7 X-DOI: 10.1080/15427560.2017.1340293 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1340293 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:3:p:281-303 Template-Type: ReDIF-Article 1.0 Author-Name: Thanh D. Huynh Author-X-Name-First: Thanh D. Author-X-Name-Last: Huynh Author-Name: Daniel R. Smith Author-X-Name-First: Daniel R. Author-X-Name-Last: Smith Title: Stock Price Reaction to News: The Joint Effect of Tone and Attention on Momentum Abstract: The authors find that the market's underreaction to good news is a driver of Gutierrez and Kelly's [2008] weekly momentum returns. By employing a dataset of 10.1 million news items in 4 regions (the U.S., Europe, Japan, and Asia Pacific), they find that stocks having important and positive news exhibit stronger return continuation. The study findings suggest that investors in international markets have similar underreaction to the same news characteristics. Journal: Journal of Behavioral Finance Pages: 304-328 Issue: 3 Volume: 18 Year: 2017 Month: 7 X-DOI: 10.1080/15427560.2017.1339190 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1339190 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:3:p:304-328 Template-Type: ReDIF-Article 1.0 Author-Name: Jean-Sébastien Michel Author-X-Name-First: Jean-Sébastien Author-X-Name-Last: Michel Title: Investor Overreaction to Analyst Reference Points Abstract: The author documents analysts' reliance on the company-issued guidance range as a frame of reference in making their EPS forecasts. Analysts who use the guidance range as a reference may limit information diffusion to market participants by keeping their true beliefs private. The author therefore analyzes the stock market's reaction to analyst forecasting decisions, and finds that investors overreact to forecasts that are exactly equal to the minimum or maximum of the guidance range, but do not overreact to other types of forecasts. The evidence presented is most consistent with overreaction driven by overconfident investors who trade too much in the face of information uncertainty. Journal: Journal of Behavioral Finance Pages: 329-343 Issue: 3 Volume: 18 Year: 2017 Month: 7 X-DOI: 10.1080/15427560.2017.1342646 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1342646 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:3:p:329-343 Template-Type: ReDIF-Article 1.0 Author-Name: Michael Bleaney Author-X-Name-First: Michael Author-X-Name-Last: Bleaney Author-Name: Spiros Bougheas Author-X-Name-First: Spiros Author-X-Name-Last: Bougheas Author-Name: Zhiyong Li Author-X-Name-First: Zhiyong Author-X-Name-Last: Li Title: Do Psychological Fallacies Influence Trading in Financial Markets? Evidence from the Foreign Exchange Market Abstract: Research in both economics and psychology suggests that when agents predict the next value of a random series they frequently exhibit two types of biases, which are called the gambler's fallacy (GF) and the hot hand fallacy (HHF). The GF is to expect a negative correlation in a process that is in fact random. The HHF is more or less the opposite of this—to believe that another heads is more likely after a run of heads. The evidence for these fallacies comes largely from situations where they are not punished (lotteries, casinos, and laboratory experiments with random returns). In many real-world situations, such as in financial markets, succumbing to fallacies is costly, which gives an incentive to overcome them. The present study is based on high-frequency data from a market maker in the foreign exchange market. Trading behavior is only partly explained by the rational exploitation of past patterns in the data. There is also evidence of the GF: a tendency to sell the dollar after it has risen persistently or strongly. Journal: Journal of Behavioral Finance Pages: 344-357 Issue: 3 Volume: 18 Year: 2017 Month: 7 X-DOI: 10.1080/15427560.2017.1331234 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1331234 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:3:p:344-357 Template-Type: ReDIF-Article 1.0 Author-Name: Tao Chen Author-X-Name-First: Tao Author-X-Name-Last: Chen Title: Investor Attention and Global Stock Returns Abstract: The author constructs a direct measure of investor attention toward global benchmark indices using Google search volume and empirically examines its impact on stock returns. The author documents a significant decrease in index returns following an increase in investor attention. This result is consistent with the investor recognition hypothesis (Merton [1987]) and the finding of no-media premium in the United States (Fang and Peress [2009]). Additional tests suggest that the attention effect may be attributable to local and U.S. investors. Finally, such negative effect of attention is found to be strengthened (weaken) in the market with positive (negative) sentiments. Journal: Journal of Behavioral Finance Pages: 358-372 Issue: 3 Volume: 18 Year: 2017 Month: 7 X-DOI: 10.1080/15427560.2017.1331235 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1331235 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:3:p:358-372 Template-Type: ReDIF-Article 1.0 Author-Name: Pamela R. Murphy Author-X-Name-First: Pamela R. Author-X-Name-Last: Murphy Author-Name: Lynnette Purda Author-X-Name-First: Lynnette Author-X-Name-Last: Purda Author-Name: David Skillicorn Author-X-Name-First: David Author-X-Name-Last: Skillicorn Title: Can Fraudulent Cues Be Transmitted by Innocent Participants? Abstract: The authors explore whether and how linguistic indicators of fraud make their way into the Management Discussion & Analysis (MD&A) section of financial reports. Although research has shown that word choice and tone can help identify fraudulent financial reports, it is as yet unclear how this occurs when these reports are written by many individuals, some of whom are unaware that financial misrepresentation is occurring. Through an examination of industry recommendations and interviews with individuals experienced in writing the MD&A section, the authors confirm that many hands are involved in drafting this portion of financial reports. The authors then structure an experiment, using a real fraud case, that asks participants to write an MD&A from truthful prior U.S. Securities and Exchange Commission filings and a memo from the CFO with suggestions of what to say in the current period MD&A. Unbeknownst to participants the CFO memo was created using phrases from financial statements subsequently identified to be fraudulent. The authors find that individuals do unwittingly write MD&A associated with fraudulent financial statements with relatively little suspicion and that linguistic cues contained in the CFO memo are transmitted to the ultimate MD&A through naive and innocent participants. Journal: Journal of Behavioral Finance Pages: 1-15 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1365367 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1365367 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:1-15 Template-Type: ReDIF-Article 1.0 Author-Name: Yugang Yin Author-X-Name-First: Yugang Author-X-Name-Last: Yin Title: Fund Portfolio Holdings and Affiliated Analyst's Objectivity: Do Equity and Employment Relationship Matter? Abstract: The author investigates how the equity relationship between fund company and brokerage firm as well as employment relationship between analyst and brokerage firm affect affiliated fund stock portfolio holding and the affiliated analyst's objectivity. By using the specific data of such equity and employment relationship, the author finds that equity and employment relationship do matter in fund portfolio holdings and analyst objectivity. Specifically, analysts tend to release more optimal ratings on stocks that have been hold by the funds, and the funds tend to significantly reduce the stocks in their portfolio once the analysts have announced high ratings on the stocks. Moreover, the analysts in employment relationships with majority shareholders of funds and with a low reputation reveal worse objectivity. In addition, from the point of abnormal return, analysts in employment relationships with majority shareholders of funds and with a low reputation damage the interests of common investors. Journal: Journal of Behavioral Finance Pages: 16-29 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1366493 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1366493 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:16-29 Template-Type: ReDIF-Article 1.0 Author-Name: Andreas Oehler Author-X-Name-First: Andreas Author-X-Name-Last: Oehler Author-Name: Stefan Wendt Author-X-Name-First: Stefan Author-X-Name-Last: Wendt Author-Name: Florian Wedlich Author-X-Name-First: Florian Author-X-Name-Last: Wedlich Author-Name: Matthias Horn Author-X-Name-First: Matthias Author-X-Name-Last: Horn Title: Investors' Personality Influences Investment Decisions: Experimental Evidence on Extraversion and Neuroticism Abstract: The authors analyze the impact of individuals' degree of extraversion and neuroticism on their decision making in an experimental asset market. To establish this link between research on experimental asset markets and social psychology the authors use a unique approach that combines a questionnaire designed to assess individuals' degree of extraversion and neuroticism and an experimental asset market to assess individual financial decision making. The dataset combines 364 undergraduate business students' questionnaire responses and their trading behavior in the asset market. The authors find that extraversion and neuroticism significantly influence individuals' behavior in the experimental asset market. Specifically, more extraverted individuals pay higher prices for financial assets and they buy more financial assets when assets are overpriced than less extraverted individuals do. More neurotic individuals hold less risky assets in their financial portfolios than less neurotic individuals do. Although a large part of the explanatory power appears to be driven by gender differences, the authors still find significant impact of extraversion and neuroticism after controlling for gender effects. The study findings suggest that further research on financial markets could benefit from including personality of market participants as a crucial explanatory factor. Journal: Journal of Behavioral Finance Pages: 30-48 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1366495 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1366495 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:30-48 Template-Type: ReDIF-Article 1.0 Author-Name: Thanh Nguyen Author-X-Name-First: Thanh Author-X-Name-Last: Nguyen Author-Name: Liem T. Nguyen Author-X-Name-First: Liem T. Author-X-Name-Last: Nguyen Author-Name: Anh Duc Ngo Author-X-Name-First: Anh Duc Author-X-Name-Last: Ngo Author-Name: Hari Adhikari Author-X-Name-First: Hari Author-X-Name-Last: Adhikari Title: CEO Optimism and the Credibility of Open-Market Stock Repurchase Announcements Abstract: Given their low-cost and low level of commitment, open-market stock repurchase announcements are often viewed by the market with a degree of skepticism, leading to a weak initial market reaction followed by positive stock price drifts. The authors argue that the repurchase announcements made by optimistic CEOs should be more credible than those made by nonoptimistic CEOs. Our results show that optimistic CEOs are more likely to actually buy back their shares after the announcements and the abnormal returns following repurchase announcements are larger for optimistic CEOs. This evidence suggests that CEO optimism is an important factor that the market seems to overlook while evaluating the credibility of open-market repurchase announcements. Our main contribution is to link one of the most important managerial traits, optimism, to the open-market repurchases. Journal: Journal of Behavioral Finance Pages: 49-61 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1366491 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1366491 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:49-61 Template-Type: ReDIF-Article 1.0 Author-Name: Derek Lehmberg Author-X-Name-First: Derek Author-X-Name-Last: Lehmberg Author-Name: Matt Davison Author-X-Name-First: Matt Author-X-Name-Last: Davison Title: The Impact of Power Distance and Uncertainty Avoidance on Real Options Exercise: Potential for Suboptimal Time Delays and Value Destruction Abstract: Real options (RO) valuation has been promoted as a way to evaluate investment opportunities and make investment decisions that takes into account the value of managerial flexibility in the face of uncertainty. Although RO enjoys a substantial body of literature considering its application and suitability in different situations, the impact of national culture on the application of RO has received little attention. Values embedded in national culture affect the behavior of managers. In particular, these values play a role in how managers frame information, communicate, and make decisions, directly and indirectly affecting behavior through cultural layers such as organizational culture. National culture, therefore, can systematically affect the application of RO, potentially leading to suboptimal outcomes. In this article, we hypothesize how 2 particularly relevant dimensions of culture, power distance and uncertainty avoidance, affect RO exercise, and estimate the magnitude suboptimality of these effects using a model we develop for the case of a put option. Our estimates suggest RO may not always be a superior valuation approach to net present value for national cultures with certain characteristics. Journal: Journal of Behavioral Finance Pages: 62-72 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1366494 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1366494 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:62-72 Template-Type: ReDIF-Article 1.0 Author-Name: Manojit Chattopadhyay Author-X-Name-First: Manojit Author-X-Name-Last: Chattopadhyay Author-Name: Ashish Kumar Garg Author-X-Name-First: Ashish Kumar Author-X-Name-Last: Garg Author-Name: Subrata Kumar Mitra Author-X-Name-First: Subrata Kumar Author-X-Name-Last: Mitra Title: Herding by Foreign Institutional Investors: An Evidential Exploration for Persistence and Predictability Abstract: The primary objective of the study is to explore the predictability of herding patterns of foreign institutional investors in the Indian market using high frequency data over a period from January 2003 to June 2014. Herding of an individual stock was measured estimating a simple volume based ratio and persistence of trends was detected using the runs test (Wald and Wolfowitz [1940]) on that ratio. Predictability of herding behavior has been successfully modeled by applying 7 data mining models using various measures of performance. Market regulators may consider our findings to regulate the foreign institutional investors trading to make the financial system more transparent and robust. Journal: Journal of Behavioral Finance Pages: 73-88 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1373282 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1373282 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:73-88 Template-Type: ReDIF-Article 1.0 Author-Name: Soo Yeong Ewe Author-X-Name-First: Soo Yeong Author-X-Name-Last: Ewe Author-Name: Ferdinand A. Gul Author-X-Name-First: Ferdinand A. Author-X-Name-Last: Gul Author-Name: Christina Kwai Choi Lee Author-X-Name-First: Christina Kwai Choi Author-X-Name-Last: Lee Author-Name: Chia Yen Yang Author-X-Name-First: Chia Yen Author-X-Name-Last: Yang Title: The Role of Regulatory Focus and Information in Investment Choice: Some Evidence Using Visual Cues to Frame Regulatory Focus Abstract: This study examines the role of regulatory focus and additional information on risk preferences in investment choice using an experimental approach. The findings reveal that situational regulatory focus plays an important role in influencing investment choice. In particular, a congruent promotion-focused image and related message increases risk-taking behavior in terms of choice for stocks rather than fixed deposits, whereas the reverse is true for a congruent prevention-focused image and related message. However, this relationship depends on the amount of information available during the decision-making process, and regulatory focus has a stronger impact on investment choice under the condition without additional financial information. Journal: Journal of Behavioral Finance Pages: 89-100 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1373283 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1373283 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:89-100 Template-Type: ReDIF-Article 1.0 Author-Name: Alycia Chin Author-X-Name-First: Alycia Author-X-Name-Last: Chin Author-Name: Wändi Bruine de Bruin Author-X-Name-First: Wändi Author-X-Name-Last: Bruine de Bruin Title: Eliciting Stock Market Expectations: The Effects of Question Wording on Survey Experience and Response Validity Abstract: Expectations about stock market movements are an important factor in models of investments and savings. To better understand consumers' financial behavior, economic surveys such as the Health and Retirement Study (HRS) ask participants to report expectations about the stock market. However, readability statistics suggest that the HRS' stock market expectations questions use relatively complex wording, which may contribute to their relatively high rates of missing responses. Here, the authors build on survey design research to improve the readability of these questions. In 2 experiments using national online panels, they test whether revising stock market expectation questions to reduce their difficulty affects respondents' (1) survey experience, as measured by percent of missing answers and ratings of question clarity and difficulty, and (2) response validity, as assessed by respondents' confidence in their answer and comparisons between expectations and stock market outcomes. In both studies, the authors' revisions improved survey experience. Unfortunately, revisions also decreased the perceived (Study 1) and actual (Study 2) validity of responses. The authors discuss implications of question revisions for the design of economic surveys. Journal: Journal of Behavioral Finance Pages: 101-110 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1373353 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1373353 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:101-110 Template-Type: ReDIF-Article 1.0 Author-Name: Fernando Palao Author-X-Name-First: Fernando Author-X-Name-Last: Palao Author-Name: Angel Pardo Author-X-Name-First: Angel Author-X-Name-Last: Pardo Title: Do Price Barriers Exist in the European Carbon Market? Abstract: It is generally thought that psychological prices in markets primarily traded by professional participants should play a limited role. The authors investigate the existence of key reference points in the European Carbon Market, which can be considered as a market with highly qualified stakeholders. They document the presence of key levels and barrier bands around European Union Allowances (EUA) prices. It appears that traders tend to consider these price levels as resistances in upward movements and as supports in downward movements. Furthermore, the authors have observed that the existence of price barriers affects both return and volume dynamics. Therefore, the results indicate that there exist certain EUA prices that do, in fact, modify the behavior of European Carbon Market participants. Journal: Journal of Behavioral Finance Pages: 111-124 Issue: 1 Volume: 19 Year: 2018 Month: 1 X-DOI: 10.1080/15427560.2017.1366492 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1366492 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:1:p:111-124 Template-Type: ReDIF-Article 1.0 Author-Name: Hazel Bateman Author-X-Name-First: Hazel Author-X-Name-Last: Bateman Author-Name: Ralph Stevens Author-X-Name-First: Ralph Author-X-Name-Last: Stevens Author-Name: Andy Lai Author-X-Name-First: Andy Author-X-Name-Last: Lai Title: Risk Information and Retirement Investment Choice Mistakes Under Prospect Theory Abstract: We assess alternative presentations of investment risk using a discrete choice experiment which asked subjects to rank three investment portfolios for retirement savings across nine risk presentation formats and four underlying risk levels. Using Prospect Theory utility specifications, we estimate individual-specific parameters for risk preferences in gains and losses, loss aversion, and error propensity variability. Our results support presentations that describe investment risk using probability tails. Risk preferences and error propensity were found to vary significantly across sociodemographic groups and levels of financial literacy. Our findings should assist regulatory efforts to disclose risk information to the mass market. Journal: Journal of Behavioral Finance Pages: 279-296 Issue: 4 Volume: 16 Year: 2015 Month: 10 X-DOI: 10.1080/15427560.2015.1095749 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1095749 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:279-296 Template-Type: ReDIF-Article 1.0 Author-Name: Jürgen Vandenbroucke Author-X-Name-First: Jürgen Author-X-Name-Last: Vandenbroucke Title: A Cumulative Prospect View on Portfolios that Hold Structured Products Abstract: Many investors hold structured products in their portfolio. The current paper develops a break-even analysis on how this presence of structured products can be understood based on cumulative prospect theory. The framework provides additional insights into the behavioral conditions and required return expectations that make investors buy into expensive structured products with uncertain rewards. We make the strong assumption that the structured product has a zero prospect value when considered as a stand-alone investment. Still the optimized portfolio typically includes structured products. The degree of probability distortion determines the entry of structured products in the optimal portfolio. Once included it is the curvature of the value function that guides the actual weight of structured products and the potential increase in portfolio prospect value. Structured products receive a higher weight and increase the portfolio prospect value more if the investor is less conservative. Journal: Journal of Behavioral Finance Pages: 297-310 Issue: 4 Volume: 16 Year: 2015 Month: 10 X-DOI: 10.1080/15427560.2015.1095750 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1095750 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:297-310 Template-Type: ReDIF-Article 1.0 Author-Name: Hung-Cheng Lai Author-X-Name-First: Hung-Cheng Author-X-Name-Last: Lai Author-Name: Kuan-Min Wang Author-X-Name-First: Kuan-Min Author-X-Name-Last: Wang Title: Trading Behavior of Institutional Investors and Stock Index Futures Returns in Taiwan Abstract: In this study, the relationship between three institutional investors' trading behaviors and Taiwan stock index futures returns is investigated. Empirical results show that foreign institutional investors (FINI) in the futures market are negative feedback traders while the investment trusts are positive feedback traders. Both trading behaviors follow the returns of index futures. Moreover, the net trading volume of FINI has a significantly positive effect on Taiwan stock index futures returns. In addition, the impact of Taiwan stock index returns for the open interest has a persistent effect. Finally, it was found that extreme net open interest of dealers predicts Taiwan stock index futures. Journal: Journal of Behavioral Finance Pages: 311-326 Issue: 4 Volume: 16 Year: 2015 Month: 10 X-DOI: 10.1080/15427560.2015.1095751 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1095751 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:311-326 Template-Type: ReDIF-Article 1.0 Author-Name: Thanh Huong Dinh Author-X-Name-First: Thanh Huong Author-X-Name-Last: Dinh Author-Name: Jean-François Gajewski Author-X-Name-First: Jean-François Author-X-Name-Last: Gajewski Title: Trading Volume, Heterogeneous Expectations, and Earnings Announcements Abstract: Using the experimental method, this paper provides evidence that the dispersion of beliefs is the main driver behind trading volume. However, in contrast with existing literature, we show that the relationship between trading volume and heterogeneity of expectations is more concave than linear. We study investors' reactions in terms of trading volume to the announcement of earnings. The experiment shows that heterogeneity of expectations does not decrease when investors have more information about the final results. This heterogeneity is also the main factor behind transactions in our experimental asset markets. However, too large a dispersion in expectations dissuades investors from trading. Journal: Journal of Behavioral Finance Pages: 327-343 Issue: 4 Volume: 16 Year: 2015 Month: 10 X-DOI: 10.1080/15427560.2015.1095753 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1095753 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:327-343 Template-Type: ReDIF-Article 1.0 Author-Name: Jayendra Gokhale Author-X-Name-First: Jayendra Author-X-Name-Last: Gokhale Author-Name: Carol Horton Tremblay Author-X-Name-First: Carol Horton Author-X-Name-Last: Tremblay Author-Name: Victor J. Tremblay Author-X-Name-First: Victor J. Author-X-Name-Last: Tremblay Title: Misvaluation and Behavioral Bias in Financial Markets Abstract: Early models in finance posit that security prices respond quickly to new information and accurately reflect their fundamental values. More recent work indicates that market frictions and the psychological limitations of traders can cause asset prices to deviate from their fundamental values for a considerable length of time. In this paper, we develop an empirical method that tests for and estimates the degree of valuation bias. Being better able to detect valuation bias reveals profit opportunities and may improve the efficiency of financial markets if it sufficiently changes trader behavior. Journal: Journal of Behavioral Finance Pages: 344-356 Issue: 4 Volume: 16 Year: 2015 Month: 10 X-DOI: 10.1080/15427560.2015.1095756 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1095756 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:344-356 Template-Type: ReDIF-Article 1.0 Author-Name: Shengle Lin Author-X-Name-First: Shengle Author-X-Name-Last: Lin Title: Information Diffusion and Momentum in Laboratory Markets Abstract: Theories emphasize the market's capacity of correctly aggregating disperse information so long as the market holds complete information. Recent empirical evidences suggest that the extent of information aggregation also depends upon the dissemination of existing information. In laboratory market, I investigate the market's aggregation capacity in response to the spreading of existing information. The results demonstrate that prices gradually converge to intrinsic value and exhibit momentum in the process of information diffusion. The analysis suggests that aggregation of disperse information is mitigated by the presence of equilibrium multiplicity. Journal: Journal of Behavioral Finance Pages: 357-372 Issue: 4 Volume: 16 Year: 2015 Month: 10 X-DOI: 10.1080/15427560.2015.1095757 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1095757 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:357-372 Template-Type: ReDIF-Article 1.0 Author-Name: Junghee Lee Author-X-Name-First: Junghee Author-X-Name-Last: Lee Author-Name: Jung-wha Lee Author-X-Name-First: Jung-wha Author-X-Name-Last: Lee Title: Analyst Herding Behavior and Analyst Affiliation: Evidence from Business Groups Abstract: This paper examines analysts herding behavior when there are two groups of analysts where one group has affiliation with the subject firm and one group does not. We found that the unaffiliated analysts issue the forecasts herding towards their prior affiliated analysts' forecasts. The unaffiliated analysts' herding with affiliated analysts is intensified by positive information delivered by affiliated analysts. In addition, the herding with affiliated analysts results from unaffiliated analysts' strategic actions to maximize forecast accuracy. Overall, when significant information asymmetry exists, the findings suggest that unaffiliated analysts use affiliated analysts' forecasts as a primary information source to forecast earnings. Journal: Journal of Behavioral Finance Pages: 373-386 Issue: 4 Volume: 16 Year: 2015 Month: 10 X-DOI: 10.1080/15427560.2015.1098640 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1098640 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:373-386 Template-Type: ReDIF-Article 1.0 Author-Name: The Editors Title: EOV Editorial Board Journal: Journal of Behavioral Finance Pages: ebi-ebi Issue: 4 Volume: 16 Year: 2015 Month: 10 X-DOI: 10.1080/15427560.2015.1113768 File-URL: http://hdl.handle.net/10.1080/15427560.2015.1113768 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:16:y:2015:i:4:p:ebi-ebi Template-Type: ReDIF-Article 1.0 Author-Name: Taejun (David) Lee Author-X-Name-First: Taejun (David) Author-X-Name-Last: Lee Author-Name: TaiWoong Yun Author-X-Name-First: TaiWoong Author-X-Name-Last: Yun Author-Name: Eric Haley Author-X-Name-First: Eric Author-X-Name-Last: Haley Title: What You Think You Know: The Effects of Prior Financial Education and Readability on Financial Disclosure Processing Abstract: Disclosures in advertising and other forms of marketing communication have been examined as a means to help consumers understand complex financial information and make more informed decisions regarding financial products and services. The authors extend inquiry into this supposition by looking at the readability of disclosures in relation to consumer financial literacy. In an experiment, it was found that while highly readable disclosures facilitate more accurate information processing for those with prior financial education, such disclosures might actually inhibit accurate processing for those without prior financial education. This suggests that policy cannot rely on mandated disclosure in marketing communications alone. Rather, disclosures in financial product or services communication can only be effective if such disclosures are paired with other forms of education leading to greater financial literacy. Journal: Journal of Behavioral Finance Pages: 125-142 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1276064 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1276064 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:125-142 Template-Type: ReDIF-Article 1.0 Author-Name: Kai Duttle Author-X-Name-First: Kai Author-X-Name-Last: Duttle Author-Name: Keigo Inukai Author-X-Name-First: Keigo Author-X-Name-Last: Inukai Title: Implications from Biased Probability Judgments for International Disparities in Momentum Returns Abstract: Momentum is a consistent phenomenon in financial data from the majority of markets around the globe. One prominent exception is the Japanese market, where returns from a momentum-investment strategy are nonexistent. The authors investigated international differences in the representativeness heuristic, which is one potential driver of momentum. After observing sequences of a random walk, subjects give probability estimates for the direction of the respective next change. The experiment was conducted in Japan and in Germany. For a subgroup of participants with lower cognitive abilities our results are perfectly in line with international momentum evidence. Journal: Journal of Behavioral Finance Pages: 143-151 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1308937 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308937 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:143-151 Template-Type: ReDIF-Article 1.0 Author-Name: Heba Ahmed Abass Ali Author-X-Name-First: Heba Ahmed Abass Author-X-Name-Last: Ali Title: Behavioral Timing, Valuation and Postissue Performance of UK Initial Public Offerings Abstract: Using a sample of 1,926 UK initial public offerings (IPOs) launched from 1987 to 2007, this study introduces a new angle on testing the behavioral timing hypothesis in the context of UK IPOs via investigating relationships between the magnitude of IPOs misvaluation and postissue stock price and operating performance. IPO misvaluation is measured using (i) an intrinsic value of the firm estimated using residual income valuation model and (ii) intensity of IPO issuance activity. The findings show that stock price and operating underperformance in the postissue are directly linked to the degree of IPOs' misvaluation. Specifically, the stock price and operating performance are found to be significantly and robustly different between hot markets IPOs and cold market IPOs 3 years postissue. We also show that overvalued IPOs have lower long-run stock returns, but outperforming operating performance, than undervalued IPOs do. Our findings are broadly consistent with the behavioral explanations of the poor stock price and operating performance, supporting the U.S. results of Purnanandam and Swaminathan [2004] and Loughran and Ritter [2000]. Journal: Journal of Behavioral Finance Pages: 152-166 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1308938 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308938 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:152-166 Template-Type: ReDIF-Article 1.0 Author-Name: Michael B. McDonald IV Author-X-Name-First: Michael B. Author-X-Name-Last: McDonald IV Title: Stock and Industry Return Characteristics Around Price Shocks Abstract: The author investigates positive and negative price shocks in individual securities and the degree to which they affect related firms in the same industry. This price contagion effect is significant with initial price shocks leading to substantial long-term abnormal returns across firms in the same industry over time. Price shocks also have predictive value regarding future earnings and revenues for the firm in question and its industry overall. Positive (negative) price shocks that are continued over time are associated with higher (lower) Sharpe ratios suggesting that abnormal returns are not simply a form of compensation for greater expected future volatility. Journal: Journal of Behavioral Finance Pages: 167-179 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1308939 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308939 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:167-179 Template-Type: ReDIF-Article 1.0 Author-Name: Jennifer Itzkowitz Author-X-Name-First: Jennifer Author-X-Name-Last: Itzkowitz Author-Name: Jesse Itzkowitz Author-X-Name-First: Jesse Author-X-Name-Last: Itzkowitz Title: Name-Based Behavioral Biases: Are Expert Investors Immune? Abstract: The market comprises investors with a broad range of expertise. As a result, investors may make decisions differently from one another. Research reveals that investors use name-based heuristics, or short-cuts, including alphabetical ordering (Itzkowitz, Itzkowitz, and Rothbort [2015]), name fluency (Anderson and Larkin [2012], Green and Jame [2013]), and name memorability (Grullon, Kanatas, and Weston [2004]) when trading stocks, resulting in irrational decisions. Because experts and novices process information differently, name-based biases may not affect all investors equally. The authors test and confirm the hypothesis that, compared to novices, expert investors are relatively immune to name-based biases. Journal: Journal of Behavioral Finance Pages: 180-188 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1308940 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308940 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:180-188 Template-Type: ReDIF-Article 1.0 Author-Name: Youki Kohsaka Author-X-Name-First: Youki Author-X-Name-Last: Kohsaka Author-Name: Grzegorz Mardyla Author-X-Name-First: Grzegorz Author-X-Name-Last: Mardyla Author-Name: Shinji Takenaka Author-X-Name-First: Shinji Author-X-Name-Last: Takenaka Author-Name: Yoshiro Tsutsui Author-X-Name-First: Yoshiro Author-X-Name-Last: Tsutsui Title: Disposition Effect and Diminishing Sensitivity: An Analysis Based on a Simulated Experimental Stock Market Abstract: The authors experimentally investigate the existence of the disposition effect and its relationship with diminishing sensitivity. Their approach includes 3 key characteristics: (i) an environment closely resembling actual stock markets, (ii) individual-specific reference prices, and (iii) a direct test of diminishing sensitivity as a correlate of the disposition effect. They find strong support for the existence of the disposition effect as an independent hypothesis. This is an improvement over previous studies, which tested this hypothesis only jointly with others. The authors' results also strongly point to diminishing sensitivity, of the type postulated by prospect theory, being positively associated with the disposition effect. Journal: Journal of Behavioral Finance Pages: 189-201 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1308941 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308941 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:189-201 Template-Type: ReDIF-Article 1.0 Author-Name: Natividad Blasco Author-X-Name-First: Natividad Author-X-Name-Last: Blasco Author-Name: Pilar Corredor Author-X-Name-First: Pilar Author-X-Name-Last: Corredor Title: The Information Environment, Informed Trading, and Volatility Abstract: The relation between informed trading and volatility is analyzed using the change in the proportion of informed transactions calculated through the probability of informed trading variable. The analysis relates to the Spanish market during 1997–2010, given that the Spanish market covers a very diverse range of listed companies. Some companies are comparable to companies listed on U.S. markets while others are smaller in size and have a lower trading volume and inferior quality of information. The methodology is based on a modification of the model proposed by Avramov, Chordia, and Goyal [2006]. The authors’ proposal incorporates the change in the proportion of informed transactions, calculated with intraday data, into the volatility model. The results are also presented using a conditional volatility model in which the change in the proportion of informed transactions is incorporated. These results attest to the influence of informed trading as a price-stabilizing factor in heavily traded and highly capitalized stocks (familiar stocks). Informed trading leads to a marked decrease in volatility for these particular stocks both in periods of calm and crisis. Journal: Journal of Behavioral Finance Pages: 202-218 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1308943 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308943 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:202-218 Template-Type: ReDIF-Article 1.0 Author-Name: Nicoletta Marinelli Author-X-Name-First: Nicoletta Author-X-Name-Last: Marinelli Author-Name: Camilla Mazzoli Author-X-Name-First: Camilla Author-X-Name-Last: Mazzoli Author-Name: Fabrizio Palmucci Author-X-Name-First: Fabrizio Author-X-Name-Last: Palmucci Title: Mind the Gap: Inconsistencies Between Subjective and Objective Financial Risk Tolerance Abstract: Investors' financial risk tolerance is crucial in the formulation of suitable financial advice; in the past, assessment efforts relied on multiple approaches and techniques, but their consistency is still an issue. The authors focus on 2 metrics traditionally proposed (self-assessment and portfolio composition) and test their mutual consistency on a sample of 2,374 investors. The approach allows them to discriminate between inconsistencies due to wrong portfolio compositions and those arising from wrong self-assessments. The authors show that low financial literacy, high income, no children, and incautious economic behavior are commonly associated with such inconsistencies. Journal: Journal of Behavioral Finance Pages: 219-230 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1308944 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308944 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:219-230 Template-Type: ReDIF-Article 1.0 Author-Name: Tim Loughran Author-X-Name-First: Tim Author-X-Name-Last: Loughran Author-Name: Bill McDonald Author-X-Name-First: Bill Author-X-Name-Last: McDonald Title: The Use of EDGAR Filings by Investors Abstract: Using data from the Security and Exchange Commission's Electronic Data Gathering and Retrieval (EDGAR) server log, the authors examine the consumption of financial information in filings from 2003 to 2012. The EDGAR filings represent a first-source database for investors doing fundamental research on stock valuations. The magnitude of daily EDGAR requests for 10-Ks is surprisingly low and shows only a small difference between firms with and without publicly traded equity. The average publicly traded firm has their annual report requested only 28.4 total times by investors immediately after the 10-K filing. The lack of annual report requests suggests that investors generally are not doing fundamental research on stocks. Journal: Journal of Behavioral Finance Pages: 231-248 Issue: 2 Volume: 18 Year: 2017 Month: 4 X-DOI: 10.1080/15427560.2017.1308945 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1308945 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:231-248 Template-Type: ReDIF-Article 1.0 Author-Name: Yu-En Lin Author-X-Name-First: Yu-En Author-X-Name-Last: Lin Author-Name: Whei-May Fan Author-X-Name-First: Whei-May Author-X-Name-Last: Fan Author-Name: Hsiang-Hsuan Chih Author-X-Name-First: Hsiang-Hsuan Author-X-Name-Last: Chih Title: Throwing Good Money After Bad? The Impact of the Escalation of Commitment of Mutual Fund Managers on Fund Performance Abstract: Numerous prior studies refer to the potential existence of irrational investment behavior among mutual fund managers, such as disposition effect. However, the focus in such studies has been placed on the irrationality of their selling decisions, although similar problems may be inherent in their buying decisions. This study presents evidence that if mutual fund managers do display a tendency to escalate their commitment to losing stocks, there will be negative impacts on the performance of the funds. Managers continue to buy losers not because they judged to choose rationally but rather because of irrational escalation of commitment. Journal: Journal of Behavioral Finance Pages: 1-15 Issue: 1 Volume: 15 Year: 2014 Month: 1 X-DOI: 10.1080/15427560.2013.849706 File-URL: http://hdl.handle.net/10.1080/15427560.2013.849706 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:1:p:1-15 Template-Type: ReDIF-Article 1.0 Author-Name: Anjali Nursimulu Author-X-Name-First: Anjali Author-X-Name-Last: Nursimulu Author-Name: Peter Bossaerts Author-X-Name-First: Peter Author-X-Name-Last: Bossaerts Title: Excessive Volatility is Also a Feature of Individual Level Forecasts Abstract: The excessive volatility of prices in financial markets is one of the most pressing puzzles in social science. It has led many to question economic theory, which attributes beneficial effects to markets in the allocation of risks and the aggregation of information. In exploring its causes, we investigated to what extent excessive volatility can be observed at the individual level. Economists claim that securities prices are forecasts of future outcomes. Here, we report on a simple experiment in which participants were rewarded to make the most accurate possible forecast of a canonical financial time series. We discovered excessive volatility in individual-level forecasts, paralleling the finding at the market level. Assuming that participants updated their beliefs based on reinforcement learning, we show that excess volatility emerged because of a combination of three factors. First, we found that submitted forecasts were noisy perturbations of participants’ revealed beliefs. Second, beliefs were updated using a prediction error based on submitted forecast rather than revealed past beliefs. Third, in updating beliefs, participants maladaptively decreased learning speed with prediction risk. Our results reveal formerly undocumented features in individual-level forecasting that may be critical to understand the inherent instability of financial markets and inform regulatory policy. Journal: Journal of Behavioral Finance Pages: 16-29 Issue: 1 Volume: 15 Year: 2014 Month: 1 X-DOI: 10.1080/15427560.2014.877016 File-URL: http://hdl.handle.net/10.1080/15427560.2014.877016 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:1:p:16-29 Template-Type: ReDIF-Article 1.0 Author-Name: Ray R. Sturm Author-X-Name-First: Ray R. Author-X-Name-Last: Sturm Title: A Turning Point Method For Measuring Investor Sentiment Abstract: Technical analysis has always been a controversial topic with weak evidence in the literature while behavioral finance has enjoyed success. Yet the objective of technical analysis is to measure investors’ behavior, implying the need to reexamine the study of technical methods. This study begins to close the gap in evidence between behavioral finance and technical analysis by developing an objective turning point methodology to infer unobservable investor sentiment. Using Parkinson's [1980] estimate of volatility, the findings indicate that the turning point method not only captures investor sentiment effectively, but more effectively than traditional time-static methods. Journal: Journal of Behavioral Finance Pages: 30-42 Issue: 1 Volume: 15 Year: 2014 Month: 1 X-DOI: 10.1080/15427560.2014.877464 File-URL: http://hdl.handle.net/10.1080/15427560.2014.877464 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:1:p:30-42 Template-Type: ReDIF-Article 1.0 Author-Name: Smadar Siev Author-X-Name-First: Smadar Author-X-Name-Last: Siev Title: The PR Premium Abstract: Press releases (PR) are the most common and popular way for a firm to publicize its news. The annual number of PR varies substantially among firms, from just a few to hundreds. This work documents a gap in stock's returns between firms that publish low and high number of PR per annum in favor of the former. This gap was found for both the year of publication and the following one and its magnitude is 7–8% and 5–6%, respectively. This gap remains intact even after controlling for firm characteristics such as beta, market capitalization and more. I call this gap the “PR Premium.” Journal: Journal of Behavioral Finance Pages: 43-55 Issue: 1 Volume: 15 Year: 2014 Month: 1 X-DOI: 10.1080/15427560.2014.878133 File-URL: http://hdl.handle.net/10.1080/15427560.2014.878133 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:1:p:43-55 Template-Type: ReDIF-Article 1.0 Author-Name: Kay Blaufus Author-X-Name-First: Kay Author-X-Name-Last: Blaufus Author-Name: Axel Möhlmann Author-X-Name-First: Axel Author-X-Name-Last: Möhlmann Title: Security Returns and Tax Aversion Bias: Behavioral Responses to Tax Labels Abstract: This article studies behavioral responses to taxes in financial markets. It is motivated by recent puzzling empirical evidence of taxable municipal bond yields significantly exceeding the level expected relative to tax exempt bonds. A behavioral explanation is a tax aversion bias, the phenomenon that people perceive an additional burden associated with tax payments. We conduct market experiments on the trading of differently taxed and labeled securities. The data show an initial overvaluation of tax payments that diminishes when subjects gain experience. The tax deduction of expenses is valued more than an equivalent tax exemption of earnings. We find that the persistence of the tax aversion bias critically depends on the quality of feedback. This suggests that tax aversion predominantly occurs in one-time, unfamiliar financial decisions and to a lesser extent in repetitive choices. Journal: Journal of Behavioral Finance Pages: 56-69 Issue: 1 Volume: 15 Year: 2014 Month: 1 X-DOI: 10.1080/15427560.2014.877017 File-URL: http://hdl.handle.net/10.1080/15427560.2014.877017 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:1:p:56-69 Template-Type: ReDIF-Article 1.0 Author-Name: Ning Du Author-X-Name-First: Ning Author-X-Name-Last: Du Author-Name: Marjorie K. Shelley Author-X-Name-First: Marjorie K. Author-X-Name-Last: Shelley Title: Exploring Ambiguity and Familiarity Effects in The “Earnings Game” Between Managers and Investors Abstract: Prior evidence suggests that managers and investors play an earnings game in which managers bias their earnings forecasts downward as the earnings announcement date approaches. Knowing managers’ incentives to provide biased guidance, investors still revise their expectations downward helping to create “positive earnings surprises.” Using a 2 (ambiguity) × 2 (familiarity) between subject randomized experimental design where MBA students playing the roles of manager and investor answer a series of questions related to earnings guidance, we investigate whether earnings environment ambiguity and manager-investor familiarity influence behavior during the “earnings game.” In general, results from this study suggest that ambiguity contributes to managers’ propensity to mislead and investors’ propensity to follow, and a false sense of familiarity may amplify investors’ reliance on managers’ guidance. Journal: Journal of Behavioral Finance Pages: 70-77 Issue: 1 Volume: 15 Year: 2014 Month: 1 X-DOI: 10.1080/15427560.2014.877015 File-URL: http://hdl.handle.net/10.1080/15427560.2014.877015 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:1:p:70-77 Template-Type: ReDIF-Article 1.0 Author-Name: Cary Deck Author-X-Name-First: Cary Author-X-Name-Last: Deck Author-Name: David Porter Author-X-Name-First: David Author-X-Name-Last: Porter Author-Name: Vernon Smith Author-X-Name-First: Vernon Author-X-Name-Last: Smith Title: Double Bubbles in Assets Markets With Multiple Generations Abstract: We construct an asset market in a finite horizon overlapping-generations environment. Subjects are tested for comprehension of their fundamental value exchange environment and then reminded during each of 25 periods of the environment's declining new value. We observe price bubbles forming when new generations enter the market with additional liquidity and bursting as old generations exit the market and withdrawing cash. The entry and exit of traders in the market creates an M shaped double bubble price path over the life of the traded asset. This finding is significant in documenting that bubbles can reoccur within one extended trading horizon and, consistent with previous cross-subject comparisons, shows how fluctuations in market liquidity influence price paths. We also find that trading experience leads to price expectations that incorporate fundamental value. Journal: Journal of Behavioral Finance Pages: 79-88 Issue: 2 Volume: 15 Year: 2014 Month: 4 X-DOI: 10.1080/15427560.2014.908884 File-URL: http://hdl.handle.net/10.1080/15427560.2014.908884 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:2:p:79-88 Template-Type: ReDIF-Article 1.0 Author-Name: Metin Argan Author-X-Name-First: Metin Author-X-Name-Last: Argan Author-Name: Guven Sevil Author-X-Name-First: Guven Author-X-Name-Last: Sevil Author-Name: Abdullah Yalama Author-X-Name-First: Abdullah Author-X-Name-Last: Yalama Title: The Effect of Word-of-Mouth Communication on Stock Holdings and Trades: Empirical Evidence From an Emerging Market Abstract: The purpose of this study is to investigate the relationship between investors’ satisfaction and intention and word-of-mouth communication. This study contributes to the ongoing debate on the relationship between investor behavior and word-of-mouth communication. Many studies are related to investors’ participation and individual investors’ asset allocation decisions that are instigated by their social community via word-of-mouth communication whereas this study directly investigates the relationship between investment satisfaction and intention and word-of-mouth communication. We emphasize how many factors are considered when making satisfactory investment decisions. Our results confirm the strong relationship between the satisfaction and intention of investors and word-of-mouth communication. This finding may be useful to regulators, investors and managers who seek to establish effective rules for stock holdings and trade. Journal: Journal of Behavioral Finance Pages: 89-98 Issue: 2 Volume: 15 Year: 2014 Month: 4 X-DOI: 10.1080/15427560.2014.914029 File-URL: http://hdl.handle.net/10.1080/15427560.2014.914029 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:2:p:89-98 Template-Type: ReDIF-Article 1.0 Author-Name: Philip Y. K. Cheng Author-X-Name-First: Philip Y. K. Author-X-Name-Last: Cheng Title: Decision Utility and Anticipated Discrete Emotions: An Investment Decision Model Abstract: Integrating theories and findings from various disciplines, we develop a decision utility model to explain how anticipated discrete emotions mediate investment decisions. We illustrate the model with the anticipated discrete emotions of a hypothetical Ponzi scheme investor and suggest practical measures to manage financial risks, emotionally. Journal: Journal of Behavioral Finance Pages: 99-108 Issue: 2 Volume: 15 Year: 2014 Month: 4 X-DOI: 10.1080/15427560.2014.908885 File-URL: http://hdl.handle.net/10.1080/15427560.2014.908885 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:2:p:99-108 Template-Type: ReDIF-Article 1.0 Author-Name: Patrick Schotanus Author-X-Name-First: Patrick Author-X-Name-Last: Schotanus Title: Mr. Market's Mind: Finance's Hard Problem Abstract: The market as a mind is the implicit premise in any discussion on whether the market is rational or not. Still, its implications, in terms of ontology and epistemology, are hardly understood. In particular, this paper defines the market's version of the mind-body problem and labels it as finance's “hard” problem. Its denial by modern finance causes this dominant paradigm to fail in dealing with reality in general and to produce incomplete investment knowledge in particular. Finally, as part of facing up to this problem, this paper offers a glimpse at a practical approach which may enrich investment research. Journal: Journal of Behavioral Finance Pages: 109-119 Issue: 2 Volume: 15 Year: 2014 Month: 4 X-DOI: 10.1080/15427560.2014.908883 File-URL: http://hdl.handle.net/10.1080/15427560.2014.908883 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:2:p:109-119 Template-Type: ReDIF-Article 1.0 Author-Name: Matthew Pinnuck Author-X-Name-First: Matthew Author-X-Name-Last: Pinnuck Title: The New York Times and Wall Street Journal: Does Their Coverage of Earnings Announcements Cause “Stale” News to Become “New” News? Abstract: Recent research suggests that the stock market reacts to stale information if it is reported in the media because it is gives the impression of being “new” news. The objective of this study is to provide a unique test of this hypothesis using the time-series properties of quarterly earnings. It is well documented that seasonally differenced quarterly earnings for adjacent quarters are positively correlated. Therefore a component of current quarter earnings when reported is news that was known or predictable at the end of the prior quarter and thus is old news. We find for those firms that receive media coverage in the Wall Street Journal and The New York Times that the price reaction at the time of the announcement of current earnings to past quarter's seasonally differenced quarterly earnings is greater than those firms that do not receive media coverage. The result is consistent with stale earnings information being given the appearance of new information resulting in a further price reaction. This suggests that the stale information hypothesis and media coverage could be a partial explanation for post-earnings announcement drift. Journal: Journal of Behavioral Finance Pages: 120-132 Issue: 2 Volume: 15 Year: 2014 Month: 4 X-DOI: 10.1080/15427560.2014.908881 File-URL: http://hdl.handle.net/10.1080/15427560.2014.908881 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:2:p:120-132 Template-Type: ReDIF-Article 1.0 Author-Name: C. José García Author-X-Name-First: C. Author-X-Name-Last: José García Author-Name: Begoña Herrero Author-X-Name-First: Begoña Author-X-Name-Last: Herrero Author-Name: Ana M. Ibáñez Author-X-Name-First: Ana M. Author-X-Name-Last: Ibáñez Title: Information and Investor Behavior Surrounding Earnings Announcements Abstract: The goal of this paper is to analyze the impact of annual earnings announcements on the market through the order flow data in addition to the usual transaction data. In this respect, examining order flow data can potentially reveal valuable information that is not available from transaction data. In fact, the data allow us to test hypotheses about asymmetric information and investor behavior and to test if the behavior varies with investor sophistication. In addition, the paper tries to identify the determinants of the impact on a firm's value using assumptions about investor behavior. Journal: Journal of Behavioral Finance Pages: 133-143 Issue: 2 Volume: 15 Year: 2014 Month: 4 X-DOI: 10.1080/15427560.2014.908882 File-URL: http://hdl.handle.net/10.1080/15427560.2014.908882 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:2:p:133-143 Template-Type: ReDIF-Article 1.0 Author-Name: Jose Luis Miralles-Marcelo Author-X-Name-First: Jose Luis Author-X-Name-Last: Miralles-Marcelo Author-Name: Jose Luis Miralles-Quiros Author-X-Name-First: Jose Luis Author-X-Name-Last: Miralles-Quiros Author-Name: Maria del Mar Miralles-Quiros Author-X-Name-First: Maria del Mar Author-X-Name-Last: Miralles-Quiros Title: Intraday Stock Market Behavior After Shocks: The Importance of Bull and Bear Markets in Spain Abstract: The stock market behavior after different shocks has been analyzed from different points of view, but none has considered, as in this work, the possibility of combining different procedures, intraday returns over six days, and different phases of the markets in the Spanish stock market. The inconclusive results that we find following the previous empirical methodologies make way to interesting results when bull and bear markets are considered. We find that positive shocks are much more important than negative shocks, especially in downward trends where we find a significant overreaction effect that can be associated with the pessimism prevailing in a bear market after the “dead cat bounce” which represents those positive shocks. Journal: Journal of Behavioral Finance Pages: 144-159 Issue: 2 Volume: 15 Year: 2014 Month: 4 X-DOI: 10.1080/15427560.2014.911743 File-URL: http://hdl.handle.net/10.1080/15427560.2014.911743 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:2:p:144-159 Template-Type: ReDIF-Article 1.0 Author-Name: Marc W. Simpson Author-X-Name-First: Marc W. Author-X-Name-Last: Simpson Author-Name: Axel Grossman Author-X-Name-First: Axel Author-X-Name-Last: Grossman Title: The Role of Industry Effects in Simultaneous Reversal and Momentum Patterns in One-Month Stock Returns Abstract: When stocks are ranked by returns in one month, the portfolio of loser stocks tends to outperform the portfolio of winner stocks in the subsequent month. Yet industry portfolios tend to display momentum. We develop a model of information diffusion among agents with constrained information processing ability that reconciles these well-documented phenomena. We test whether this model or the overreaction hypothesis is consistent with the data. Additionally, a trading strategy based on the model outperforms strategies based on overreaction and on industry momentum. The strategy produces abnormal returns while controlling for market–risk and the size, book value, January, momentum, and liquidity effects. Journal: Journal of Behavioral Finance Pages: 309-320 Issue: 4 Volume: 17 Year: 2016 Month: 10 X-DOI: 10.1080/15427560.2016.1203323 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1203323 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:4:p:309-320 Template-Type: ReDIF-Article 1.0 Author-Name: Steven J. Nooijen Author-X-Name-First: Steven J. Author-X-Name-Last: Nooijen Author-Name: Simon A. Broda Author-X-Name-First: Simon A. Author-X-Name-Last: Broda Title: Predicting Equity Markets with Digital Online Media Sentiment: Evidence from Markov-switching Models Abstract: The authors examine the predictive capabilities of online investor sentiment for the returns and volatility of MSCI U.S. Equity Sector Indices by including exogenous variables in the mean and volatility specifications of a Markov-switching model. As predicted by the semistrong efficient market hypothesis, they find that the Thomson Reuters Marketpsych Indices (TRMI) predict volatility to a greater extent than they do returns. The TRMI derived from equity specific digital news are better predictors than similar sentiment from social media. In the two-regime setting, there is evidence supporting the hypothesis of emotions playing a more important role during stressed markets compared to calm periods. The authors also find differences in sentiment sensitivity between different industries: it is greatest for financials, whereas the energy and information technology sectors are scarcely affected by sentiment. Results are obtained with the R programming language. Code is available from the authors upon request. Journal: Journal of Behavioral Finance Pages: 321-335 Issue: 4 Volume: 17 Year: 2016 Month: 10 X-DOI: 10.1080/15427560.2016.1238370 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1238370 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:4:p:321-335 Template-Type: ReDIF-Article 1.0 Author-Name: Joachim Klement Author-X-Name-First: Joachim Author-X-Name-Last: Klement Title: Career Risk Abstract: The author defines asset manager career risk as the risk that asset owners terminate an existing manager due to an extended period of underperformance relative to a benchmark or peer group even though the manager has skill (defined here as positive information ratio). The author shows that myopic loss aversion gives rise to career risk even for skilled asset managers and that the current industry practice of quarterly or annual performance evaluations puts even the most skilled asset managers at risk of undue termination. The author also investigates how a reduction of tracking error leads to a reduction of career risk even though this comes at the expense of lower long-term performance. Finally, the author computes the minimum evaluation period needed to reduce career risk for asset managers of different skill levels. Journal: Journal of Behavioral Finance Pages: 336-341 Issue: 4 Volume: 17 Year: 2016 Month: 10 X-DOI: 10.1080/15427560.2016.1238375 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1238375 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:4:p:336-341 Template-Type: ReDIF-Article 1.0 Author-Name: Markum Reed Author-X-Name-First: Markum Author-X-Name-Last: Reed Title: A Study of Social Network Effects on the Stock Market Abstract: Consumer confidence is an economic indicator that measures the degree of optimism that consumers feel about the overall state of the economy as well as their personal financial situation. The authors measure consumer sentiment via analysis of social networks and show that such sentiment affects stock prices; specifically, the S&P 500 and the Dow Jones Industrial Average. Shiller, Fischer and Freidman [1984], Fisher and Statman [2003], and Bremmer [2008] also examine the influence of consumer sentiment, measured from Conference Board data, on the stock market. The authors add to this literature by creating a measure of consumer confidence by utilizing Twitter data and by examining the relationship between our measure of consumer sentiment and the S&P 500 and the Dow. They implemented lexicographic analysis of Twitter data over a three-month period and found that talk intensity of economic issues not only causes shifts in the daily stock market prices, but also has a significant negative effect. Journal: Journal of Behavioral Finance Pages: 342-351 Issue: 4 Volume: 17 Year: 2016 Month: 10 X-DOI: 10.1080/15427560.2016.1238371 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1238371 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:4:p:342-351 Template-Type: ReDIF-Article 1.0 Author-Name: Natividad Blasco Author-X-Name-First: Natividad Author-X-Name-Last: Blasco Author-Name: Pilar Corredor Author-X-Name-First: Pilar Author-X-Name-Last: Corredor Title: When and Where Are Informed Traders? What Is Their Relationship with Analysts in the Price Discovery Process? Abstract: The authors' aim was to analyze the influence of analysts' recommendations on the activity of informed and uninformed traders and whether such influence produces changes in the price discovery process. The analysis was carried out in the Spanish market, considered to be an ideal market given its characteristics. The authors' results indicate that although investors as a whole react to new information from analysts and their activity increases, this reaction is not independent of the type of stock. Informed traders do not increase their activity with small stocks to the same extent as uninformed investors do. Furthermore, the influence of these movements on price discovery is not significant. The results suggest that the interpretation role of analysts is more important for less accessible firms in terms of assessing their growth opportunities. This role may enhance the herding behavior of uninformed agents trading in those small titles for which they would otherwise need to invest extra time and extra money for taking profitable decisions. Journal: Journal of Behavioral Finance Pages: 352-364 Issue: 4 Volume: 17 Year: 2016 Month: 10 X-DOI: 10.1080/15427560.2016.1238374 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1238374 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:4:p:352-364 Template-Type: ReDIF-Article 1.0 Author-Name: Chun-Da Chen Author-X-Name-First: Chun-Da Author-X-Name-Last: Chen Author-Name: Ali M. Kutan Author-X-Name-First: Ali M. Author-X-Name-Last: Kutan Title: Information Transmission Through Rumors in Stock Markets: A New Evidence Abstract: The authors provide new evidence of the influence of false rumors based on Taiwan's stock market. The results indicate significant patterns of abnormal returns and trading volumes surrounding the event day and that the rumors seem to be disseminated in the stock market before appearing in newspapers. The results also indicate asymmetry: Investors hearing a positive rumor about a stock may tend to buy the stock, prompting a price run-up until the rumor dies away, while negative rumors usually have greater and longer negative impacts on stock returns than positive rumors do. The presence of a daily price limit is negatively correlated to the size of abnormal returns and abnormal trading volumes on the event day, and the abnormal trading volumes are more sensitive to the price limit surrounding the event day. Finally, firm managers might receive rumor information earlier and then conduct stock trading before the rumor's announcement. Journal: Journal of Behavioral Finance Pages: 365-381 Issue: 4 Volume: 17 Year: 2016 Month: 10 X-DOI: 10.1080/15427560.2016.1238373 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1238373 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:4:p:365-381 Template-Type: ReDIF-Article 1.0 Author-Name: Meir Statman Author-X-Name-First: Meir Author-X-Name-Last: Statman Title: Culture in Preferences for Income Equality and Safety Nets Abstract: Economic and social policies vary across countries, reflecting their cultures and shaping them. People in some countries are more loss averse than in others. People in some countries express stronger preferences for income equality than do people in others, and some countries offer stronger safety nets than others do. The cultural dimension of uncertainty avoidance expresses the degree to which people in a country feel uncomfortable with uncertainty and the way a country deals with the fact that the future can never be known. The author finds that uncertainty avoidance is associated with loss aversion. People are more loss averse in the domains of both portfolios and jobs in countries where uncertainty avoidance is high. Moreover, people in countries where uncertainty avoidance is high express stronger preferences for income equality, and social spending in such countries is high. The cultural dimension of power distance expresses the degree to which the less powerful members of a society accept and expect that power is distributed unequally. The author finds that people in countries where power distance is high express weaker preference for income equality, and social spending in such countries is low. Journal: Journal of Behavioral Finance Pages: 382-388 Issue: 4 Volume: 17 Year: 2016 Month: 10 X-DOI: 10.1080/15427560.2016.1238828 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1238828 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:4:p:382-388 Template-Type: ReDIF-Article 1.0 Author-Name: The Editors Title: EOV Editorial Board Journal: Journal of Behavioral Finance Pages: 389-389 Issue: 4 Volume: 17 Year: 2016 Month: 10 X-DOI: 10.1080/15427560.2016.1248197 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1248197 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:17:y:2016:i:4:p:389-389 Template-Type: ReDIF-Article 1.0 Author-Name: Maria Hartwig Author-X-Name-First: Maria Author-X-Name-Last: Hartwig Author-Name: Jason A. Voss Author-X-Name-First: Jason A. Author-X-Name-Last: Voss Author-Name: Laure Brimbal Author-X-Name-First: Laure Author-X-Name-Last: Brimbal Author-Name: D. Brian Wallace Author-X-Name-First: D. Brian Author-X-Name-Last: Wallace Title: Investment Professionals' Ability to Detect Deception: Accuracy, Bias and Metacognitive Realism Abstract: In the first empirical study on the topic, the authors examined the ability of investment professionals to distinguish between truthful and deceptive statements. A random sample of 154 investment professionals made judgments about a series of truthful and deceptive statements, some of which involved financial fraud. Investment professionals' lie detection accuracy was poor; participants performed no better than would be expected by chance. Accuracy in identifying lies about financial fraud was especially poor. Further, participants displayed poor metacognitive realism when assessing their own performance. The theoretical and practical implications for lie detection in the financial industry are discussed. Journal: Journal of Behavioral Finance Pages: 1-13 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2017.1276069 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1276069 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:1-13 Template-Type: ReDIF-Article 1.0 Author-Name: Sohyung Kim Author-X-Name-First: Sohyung Author-X-Name-Last: Kim Author-Name: Darlene Bay Author-X-Name-First: Darlene Author-X-Name-Last: Bay Title: Cognitive Dissonance as an Explanation of Goodwill Write-Offs Abstract: While agency theory has been an important part of accounting academic research, many researchers have suggested that other theories should also be considered. One such theory is the theory of cognitive dissonance. In this study, the authors develop competing hypotheses based on agency theory and the theory of cognitive dissonance regarding the decision to record an impairment of goodwill. Using an archival research methodology, they test the hypotheses on a sample of 2,274 firm-year observations. The results are consistent with the theory of cognitive dissonance even after controlling for variables that have been found to be significant under agency theory. The authors conclude that there is strong evidence to suggest that agency theory does not uniquely explain the results of management decisions as seen through financial reporting data. Journal: Journal of Behavioral Finance Pages: 14-28 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2017.1274755 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1274755 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:14-28 Template-Type: ReDIF-Article 1.0 Author-Name: Peiran Jiao Author-X-Name-First: Peiran Author-X-Name-Last: Jiao Title: Belief in Mean Reversion and the Disposition Effect: An Experimental Test Abstract: The disposition effect refers to investors' tendency to disproportionately sell more winning than losing assets. The literature mostly offered indirect evidence regarding its cause. Using a lab experiment, the author directly evaluates the two competing behavioral mechanisms for this effect: belief in mean reversion and dual risk attitudes of prospect theory. The participants were endowed with some hypothetical assets, observed price charts, and made selling decisions. Sixty-one percent of them exhibited significant disposition effect. The author elicited the participants' risk attitude parameters and beliefs about price movements, and found that beliefs, especially those in the loss domain, but not the dual risk attitudes, significantly contributed to the between-subject variation of the disposition effect. The results from a goodness-of-fit test also favor the belief mechanism. Journal: Journal of Behavioral Finance Pages: 29-44 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2017.1274754 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1274754 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:29-44 Template-Type: ReDIF-Article 1.0 Author-Name: Nathan Mauck Author-X-Name-First: Nathan Author-X-Name-Last: Mauck Author-Name: Leigh Salzsieder Author-X-Name-First: Leigh Author-X-Name-Last: Salzsieder Title: Diversification Bias and the Law of One Price: An Experiment on Index Mutual Funds Abstract: Individual investors select high-fee index mutual funds despite the fact that the future payouts are nearly identical. The authors offer an explanation for this violation of the law of one price based on investor desire to diversify. While diversification in some settings may be beneficial, in the case of assets with identical payouts, fee minimization is the only rational strategy. The evidence confirms that investors diversify by selecting multiple higher fee funds rather than minimizing fees when investing in index mutual funds. Journal: Journal of Behavioral Finance Pages: 45-53 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2017.1276067 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1276067 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:45-53 Template-Type: ReDIF-Article 1.0 Author-Name: Pieter de Jong Author-X-Name-First: Pieter Author-X-Name-Last: de Jong Author-Name: Sherif Elfayoumy Author-X-Name-First: Sherif Author-X-Name-Last: Elfayoumy Author-Name: Oliver Schnusenberg Author-X-Name-First: Oliver Author-X-Name-Last: Schnusenberg Title: From Returns to Tweets and Back: An Investigation of the Stocks in the Dow Jones Industrial Average Abstract: A sizeable percentage of investors are using social media to obtain information about companies (Cogent Research [2008]). As a consequence, social media content about firms may have an impact on stock prices (Hachman [2011]). Various studies utilize social media content to forecast stock market-related factors such as returns, volatility, or trading volume. The objective of this article is to investigate whether a bidirectional intraday relationship between stock returns and volatility and tweets exists. The study analyzed 150,180 minute-by-minute stock price and tweet data for the 30 stocks in the Dow Jones Industrial Average over a random 13-day interval from June 2 to June 18, 2014 using a BEKK-MVGARCH methodology. Findings indicate that 87% of stock returns are influenced by lagged innovations of the tweets data, but there is little evidence to support that the direction is reciprocal, with only 7% of tweets being influenced by lagged innovations of the stock returns. Results further show that the lagged innovations from 40 percent of stock returns affect the current conditional volatility of the tweets, while 73 percent of tweets affect the current conditional volatility of stock returns. Moreover, there is strong evidence to suggest that the volatility originating from the returns to the tweets persists for 33 percent of stocks; the volatility originating from the tweets to the returns persists for 73 percent of stocks. Last, 53 percent of stocks exhibit both immediate and persistent impacts from returns to tweets, while 90 percent of stocks exhibit both immediate and persistent impacts from tweets to returns. These results may help traders achieve superior returns by buying and selling individual stocks or options. Also, asset and mutual fund managers may benefit by developing a social media strategy. Journal: Journal of Behavioral Finance Pages: 54-64 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2017.1276066 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1276066 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:54-64 Template-Type: ReDIF-Article 1.0 Author-Name: Jonathan A. Milian Author-X-Name-First: Jonathan A. Author-X-Name-Last: Milian Author-Name: Antoinette L. Smith Author-X-Name-First: Antoinette L. Author-X-Name-Last: Smith Title: An Investigation of Analysts' Praise of Management During Earnings Conference Calls Abstract: Through the textual analysis of a large sample of earnings conference calls, the authors find that analysts praise management on over half of earnings conference calls by saying complimentary phrases such as “congratulations on the great quarter.” The results show that analysts' complimentary phrases reflect the nature of the information released at the earnings announcement. The authors find that the amount of praise by analysts on an earnings conference call is strongly associated with the earnings surprise and to a greater extent the earnings announcement stock return. They also find that there is value to investors in tracking analysts' flattery of management during earnings conference calls, as it predicts abnormal stock returns over the following quarter. The findings, which are incremental to prior research on the tone of earnings conference calls, highlight a previously ignored aspect of analyst feedback. Journal: Journal of Behavioral Finance Pages: 65-77 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2017.1276068 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1276068 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:65-77 Template-Type: ReDIF-Article 1.0 Author-Name: Tommy Gärling Author-X-Name-First: Tommy Author-X-Name-Last: Gärling Author-Name: Maria Andersson Author-X-Name-First: Maria Author-X-Name-Last: Andersson Author-Name: Martin Hedesström Author-X-Name-First: Martin Author-X-Name-Last: Hedesström Author-Name: Anders Biel Author-X-Name-First: Anders Author-X-Name-Last: Biel Title: An Experimental Study of Influences of Performance-Related Payments on Timing of Delegated Stock Purchases Abstract: Performance-related bonuses are important tools for investment organizations to incentivize stock traders. Yet, two experiments indicate that bonuses rewarding short-term performance may lead to worse timing of purchases. The authors propose that hyperbolic time discounting makes participants set lower aspired purchase prices for short-term (decreasing percentage) bonuses than for long-term (increasing percentage) bonuses. For this reason purchases are made earlier for decreasing than increasing percentage bonuses, earlier for decreasing than random prices, and earlier for high price volatility than for low price volatility. Neither purchases at the lowest price or highest bonus are attained. Hyperbolic time discounting may account for bubbles observed in experimental double-auction markets. Journal: Journal of Behavioral Finance Pages: 78-85 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2017.1276065 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1276065 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:78-85 Template-Type: ReDIF-Article 1.0 Author-Name: Niklas Hageback Author-X-Name-First: Niklas Author-X-Name-Last: Hageback Title: Archetypes as Triggers of Financial Bubbles Abstract: Sparking financial bubbles are irrational impulses—from mania to panic—that play a major role in collective human investment behavior. Contradicting the rational man theory, bubbles keep occurring. But to disregard its influences as aberrations have only rendered conventional economic theory as abstract academia with little practical value. However, allowing for the juxtaposition between the concepts of archetypes and the collective unconscious, as coined by the Swiss psychologist Carl Gustav Jung, and the generic anatomy of financial bubbles could provide fertile ground for an improved understanding of the seemingly irrational behavior. The author aims to demonstrate the workings of archetypes and proposes a measurement methodology designed to capture the subliminal forces that influence investment decisions. Journal: Journal of Behavioral Finance Pages: 86-98 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2017.1276582 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1276582 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:86-98 Template-Type: ReDIF-Article 1.0 Author-Name: Ning Ding Author-X-Name-First: Ning Author-X-Name-Last: Ding Author-Name: Jerry Parwada Author-X-Name-First: Jerry Author-X-Name-Last: Parwada Author-Name: Jianfeng Shen Author-X-Name-First: Jianfeng Author-X-Name-Last: Shen Title: Information Sharing within the Networks of Delegated Portfolio Managers: Evidence from Plan Sponsors and Their Subadvisers Abstract: The authors study information sharing among delegated portfolio managers through networks connected by investment mandates between plan sponsors and their subadvisers. Specifically, they identify similarity in returns, holdings, and trading between mutual funds operated by subadvisers, and test whether such similarity is stronger when two funds share a mandate network. The authors find evidence consistent with information sharing among these delegated portfolio managers. A mutual fund on average shares more similar returns, holdings, and trading with funds in subadvisory mandate networks than with funds outside the networks. Preliminary evidence suggests that information about both general investment styles and individual firms is transferred within mandate networks. Journal: Journal of Behavioral Finance Pages: 99-113 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2016.1238369 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1238369 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:99-113 Template-Type: ReDIF-Article 1.0 Author-Name: Levan Efremidze Author-X-Name-First: Levan Author-X-Name-Last: Efremidze Author-Name: George Sarraf Author-X-Name-First: George Author-X-Name-Last: Sarraf Author-Name: Karen Miotto Author-X-Name-First: Karen Author-X-Name-Last: Miotto Author-Name: Paul J. Zak Author-X-Name-First: Paul J. Author-X-Name-Last: Zak Title: The Neural Inhibition of Learning Increases Asset Market Bubbles: Experimental Evidence Abstract: The authors tested a leading theory of bubble formation, insufficient learning, in a laboratory asset market using a drug, Naltrexone, which inhibits reinforcement learning. We found that asset price bubbles in Naltrexone sessions were larger compared with placebo sessions, averaging 60% higher in amplitude and 77% larger in the deviation from fundamental value in the final 12-period trading round. There was no difference between conditions in understanding of the trading rules, overconfidence, or confusion. Participants on Naltrexone appeared unable to determine appropriate trading strategies as prices changed. The findings indicate that specific neural mechanism of reinforcement learning is involved in the formation of asset market bubbles. Journal: Journal of Behavioral Finance Pages: 114-124 Issue: 1 Volume: 18 Year: 2017 Month: 1 X-DOI: 10.1080/15427560.2016.1238372 File-URL: http://hdl.handle.net/10.1080/15427560.2016.1238372 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:1:p:114-124 Template-Type: ReDIF-Article 1.0 Author-Name: Nicholas Apergis Author-X-Name-First: Nicholas Author-X-Name-Last: Apergis Author-Name: Arusha Cooray Author-X-Name-First: Arusha Author-X-Name-Last: Cooray Author-Name: Mobeen Ur Rehman Author-X-Name-First: Mobeen Ur Author-X-Name-Last: Rehman Title: Do Energy Prices Affect U.S. Investor Sentiment? Abstract: The current literature has examined the effect of investor sentiment on energy prices, but no study ever has explored the validity of the reverse question. Therefore, this article explore whether energy prices (i.e., crude oil and natural gas prices) affect U.S. investor sentiment, using the methodology of quantile regression. The empirical results document that controlling for a number of U.S. macroeconomic and financial factors, there exists a statistically significant association between oil and natural gas prices and investor sentiment. However, only natural gas prices appear to retain their statistical significance over the majority of quantiles. These findings received robust support under alternative measures of the investor sentiment index. Journal: Journal of Behavioral Finance Pages: 125-140 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1373354 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1373354 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:125-140 Template-Type: ReDIF-Article 1.0 Author-Name: Paulo Horta Author-X-Name-First: Paulo Author-X-Name-Last: Horta Author-Name: Júlio Lobão Author-X-Name-First: Júlio Author-X-Name-Last: Lobão Title: Global and Extreme Dependence Between Investor Sentiment and Stock Returns in European Markets Abstract: The authors investigate the global and extreme dependence structure between investor sentiment and stock returns in 7 European stock markets (Belgium, France, Germany, Greece, the Netherlands, Portugal, and the UK), over the period 1985–2015. Global dependence refers to the correlation of changes in sentiment and stock returns over the whole range of these 2 variables, and extreme dependence refers to the local correlation of high (i.e. asymptotic) changes in sentiment and high stock returns. Using copula models and a bootstrap procedure, 6 statistical tests are performed for this purpose. Among the results of the tests, the authors highlight those that provide evidence of contemporaneous lower extreme dependence and contemporaneous upper extreme independence between sentiment and returns. As policy implications, these results suggest that financial stability can be promoted if regulators consider the impact of their decisions on investor sentiment. Also, the results seem to support the arguments in favor of short selling ban during turmoil periods. Finally, overall, the results are relevant for both investors and regulators and reinforce the importance of considering investor sentiment to better understand the behavior of financial markets. Journal: Journal of Behavioral Finance Pages: 141-158 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1373647 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1373647 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:141-158 Template-Type: ReDIF-Article 1.0 Author-Name: Andrey Kudryavtsev Author-X-Name-First: Andrey Author-X-Name-Last: Kudryavtsev Title: The Availability Heuristic and Reversals Following Large Stock Price Changes Abstract: The author explores the effect of the availability heuristic on large daily stock price changes and on subsequent stock returns. He hypothesizes that if a major positive (negative) stock price move takes place on a day when the stock market index rises (falls), then its magnitude may be amplified by the availability of positive (negative) investment outcomes. In both cases, the availability heuristic may cause price overreaction to the initial company-specific shock, resulting in subsequent price reversal. In line with the hypothesis, the author documents that both positive and negative large price moves accompanied by the same-sign contemporaneous daily market returns are followed by significant reversals on the next 2 trading days and over 5- and 20-day intervals following the event, the magnitude of the reversals increasing over longer postevent windows, while large stock price changes taking place on the days when the market index moves in the opposite direction are followed by nonsignificant price drifts. The results remain robust after accounting for additional company (size, beta, historical volatility) and event-specific (stock's return and trading volume on the event day) factors, and are stronger for small and volatile stocks. Journal: Journal of Behavioral Finance Pages: 159-176 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1374276 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1374276 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:159-176 Template-Type: ReDIF-Article 1.0 Author-Name: Cécile Carpentier Author-X-Name-First: Cécile Author-X-Name-Last: Carpentier Author-Name: Frédéric Romon Author-X-Name-First: Frédéric Author-X-Name-Last: Romon Author-Name: Jean-Marc Suret Author-X-Name-First: Jean-Marc Author-X-Name-Last: Suret Title: Are Investors Rational When Valuing Loss Firms? Abstract: The authors examine whether high valuation of loss firms really exists and can be explained by behavioral factors. This valuation may originate from irrational behavior of optimistic investors who prefer lottery-like stocks, or from rational expectations of firms' profitability. Using a sample of small Canadian firms going public, the authors show that both individual investors and underwriters price loss firms higher than profit firms, everything being equal. Post-IPO 3-year underperformance does not differ statistically between loss and profit firms. Investors thus apparently behave irrationally for all firms, but their irrationality does not seem greater for loss firms. Journal: Journal of Behavioral Finance Pages: 177-189 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1374277 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1374277 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:177-189 Template-Type: ReDIF-Article 1.0 Author-Name: María José Muñoz Torrecillas Author-X-Name-First: María José Author-X-Name-Last: Muñoz Torrecillas Author-Name: Taiki Takahashi Author-X-Name-First: Taiki Author-X-Name-Last: Takahashi Author-Name: Jesús Gil Roales-Nieto Author-X-Name-First: Jesús Author-X-Name-Last: Gil Roales-Nieto Author-Name: Salvador Cruz Rambaud Author-X-Name-First: Salvador Author-X-Name-Last: Cruz Rambaud Author-Name: Zaida Callejón Ruiz Author-X-Name-First: Zaida Author-X-Name-Last: Callejón Ruiz Author-Name: Blas Torrecillas Jover Author-X-Name-First: Blas Author-X-Name-Last: Torrecillas Jover Title: Impatience and Inconsistency in Intertemporal Choice: An Experimental Analysis Abstract: In this article the experiment carried out by Takahashi et al. [2009] is replicated to analyze the influence of culture, gender, origin (urban or rural), and socioeconomic level on the impulsivity and consistency of decision-making processes concerning monetary gains and losses. The results indicate that Spanish students show inconsistency, and more impulsivity over gains (i.e., more impatience, as they discount delayed outcomes more rapidly) than do Japanese and American students. Additionally, participants from urban areas show more impatience over gains than do participants from rural ones, women are more impatient than men are over losses, and participants of different socioeconomic levels show differences in their impulsivity parameters. Journal: Journal of Behavioral Finance Pages: 190-198 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1374274 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1374274 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:190-198 Template-Type: ReDIF-Article 1.0 Author-Name: Fernando Gómez-Bezares Author-X-Name-First: Fernando Author-X-Name-Last: Gómez-Bezares Author-Name: Wojciech Przychodzen Author-X-Name-First: Wojciech Author-X-Name-Last: Przychodzen Title: Bank-Affiliated Mutual Fund Managers' Trading Patterns of Parent Banks' Stocks: International Evidence Abstract: The authors explore factors influencing bank-affiliated funds' decisions to increase their holdings of parent banks' stocks by analyzing survey evidence from 113 fund managers from the United States, Canada, Great Britain, Spain, and Poland. The results suggest that the propensity to buy the controlling banks' equity among financial professionals at the time of the stock market meltdown was shaped rather by the individual taste for their assets as consumption goods than by external pressures by direct superiors or the parent banks' management. Additionally, this predisposition was influenced positively by the fund managers' tendency to herd and fund participants' expectations as well as managers' sensitivity to eventual losses and previous work experience in the owning banks. The major investment segment represented by the fund also seems to be important, with an increasing level of risk acting as the denominator. Overall, this study extends the understanding of behavioral factors in bank-affiliated funds' allocation decision making. Journal: Journal of Behavioral Finance Pages: 199-208 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1374275 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1374275 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:199-208 Template-Type: ReDIF-Article 1.0 Author-Name: Robin L. Lumsdaine Author-X-Name-First: Robin L. Author-X-Name-Last: Lumsdaine Author-Name: Rogier J. D. Potter van Loon Author-X-Name-First: Rogier J. D. Author-X-Name-Last: Potter van Loon Title: Do Survey Probabilities Match Financial Market Beliefs? Abstract: This article considers whether survey respondents' views regarding the likelihood of stock index returns exceeding specific thresholds are comparable to market views indicated by index options with strikes at analogous thresholds. It is motivated by the observation that the wording used to elicit subjective beliefs in surveys about expected future returns resembles the question a purchaser of a call option might ask. Building on this association, the authors document a similarity between the views of survey respondents and those of financial market participants as measured through call options, although the association is not 1-for-1. They find a closer association for those demonstrating a better understanding of the laws of probability, suggesting that numeracy affects the accuracy of an elicited response. Journal: Journal of Behavioral Finance Pages: 209-220 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1376330 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1376330 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:209-220 Template-Type: ReDIF-Article 1.0 Author-Name: Bernhard A. Metzger Author-X-Name-First: Bernhard A. Author-X-Name-Last: Metzger Author-Name: Robert R. Fehr Author-X-Name-First: Robert R. Author-X-Name-Last: Fehr Title: Measuring Financial Risk Attitude: How to Apply Both Regulatory and Scientific Criteria to Ensure Suitability Abstract: Due to regulatory requirements, assessing investors' attitude toward financial risks is becoming increasingly important for advisors. To address this, the authors aimed to develop a risk attitude questionnaire, based on existing instruments, which fulfills both regulatory and scientific criteria. They conducted a survey on real investors and linked the survey data to actual portfolio data to test the validity of the instrument. The risk attitude index the authors developed uses only 6 easy-to-understand items, is reliable (Cronbach's α = 0.88), and explains substantial amounts of variance (R2 = 0.40) in the investors' behavior. It therefore fulfills regulatory and scientific criteria. Journal: Journal of Behavioral Finance Pages: 221-234 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1376331 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1376331 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:221-234 Template-Type: ReDIF-Article 1.0 Author-Name: Kun Li Author-X-Name-First: Kun Author-X-Name-Last: Li Author-Name: Rick Cooper Author-X-Name-First: Rick Author-X-Name-Last: Cooper Author-Name: Ben Van Vliet Author-X-Name-First: Ben Author-X-Name-Last: Van Vliet Title: How Does High-Frequency Trading Affect Low-Frequency Trading? Abstract: High-frequency trading dominates trading in financial markets. How it affects the low-frequency trading, however, is still unclear. Using NASDAQ order book data, the authors investigate this question by categorizing orders as either high or low frequency, and examining several measures. They find that high-frequency trading enhances liquidity by increasing the trade frequency and quantity of low-frequency orders. High-frequency trading also reduces the waiting time of low-frequency limit orders and improves their likelihood of execution. The results indicate that high-frequency trading has a liquidity provision effect and improves the execution quality of low-frequency orders. Journal: Journal of Behavioral Finance Pages: 235-248 Issue: 2 Volume: 19 Year: 2018 Month: 4 X-DOI: 10.1080/15427560.2017.1376669 File-URL: http://hdl.handle.net/10.1080/15427560.2017.1376669 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:2:p:235-248 Template-Type: ReDIF-Article 1.0 Author-Name: Sean Combrink Author-X-Name-First: Sean Author-X-Name-Last: Combrink Author-Name: Charlene Lew Author-X-Name-First: Charlene Author-X-Name-Last: Lew Title: Potential Underdog Bias, Overconfidence and Risk Propensity in Investor Decision-Making Behavior Abstract: In this study we investigate whether investors are prone to take risks, both in terms of how they rate their risk propensity and their behavior in choosing between options with different risk levels, and whether they display overconfidence and underdog bias. We also investigate the relationships among underdog bias, overconfidence and risk propensity. The results indicate overconfidence levels similar to that in other populations and do not reveal underdog bias or high levels of risk propensity. We found support for a negative predictive relationship between underdog bias and overconfidence. Journal: Journal of Behavioral Finance Pages: 337-351 Issue: 4 Volume: 21 Year: 2020 Month: 10 X-DOI: 10.1080/15427560.2019.1692843 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692843 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:337-351 Template-Type: ReDIF-Article 1.0 Author-Name: Nicholas Mangee Author-X-Name-First: Nicholas Author-X-Name-Last: Mangee Author-Name: Michael D. Goldberg Author-X-Name-First: Michael D. Author-X-Name-Last: Goldberg Title: A Cointegrated VAR Analysis of Stock Price Models: Fundamentals, Psychology and Structural Change Abstract: This paper provides an empirical investigation of leading models of stock price fluctuations, including those based on canonical present value and behavioral considerations. It uses the cointegrated VAR framework to test the models’ competing predictions concerning the roles of fundamentals, psychology, and structural change in driving fluctuations. We rely on a novel dataset from Bloomberg News to capture the influence of psychological factors and the broader information that market participants use contemplating stocks’ fundamental values. We find that stock prices, earnings, and interest rates are cointegrated, but only when measures of psychological factors, a broader information set, and mean shifts are included in the cointegration relation. The results provide support for the scapegoat and imperfect knowledge models of stock prices, with weak evidence in favor of bubble models. Journal: Journal of Behavioral Finance Pages: 352-368 Issue: 4 Volume: 21 Year: 2020 Month: 10 X-DOI: 10.1080/15427560.2019.1692844 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692844 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:352-368 Template-Type: ReDIF-Article 1.0 Author-Name: Chris Meier Author-X-Name-First: Chris Author-X-Name-Last: Meier Author-Name: Lurion De Mello Author-X-Name-First: Lurion Author-X-Name-Last: De Mello Title: Investor Overconfidence in Experimental Asset Markets across Market States Abstract: This study explores how individual overconfidence adjusts after receiving extreme feedback that either supports or contradicts previous decision-making when buying or selling stocks. We find that highly contradicting feedback causes overconfidence to vanish as confidence declines sharply while supportive signals cause overconfidence to increase. Further evidence suggests that strong feedback impulses are associated with higher investor disagreement, supporting prior hypotheses that investors interpret such impulses differently. We also find that methodologies that measure overconfidence in prediction tasks systematically overstate confidence scores as respondents tend to fail to internalize stated confidence intervals appropriately. Journal: Journal of Behavioral Finance Pages: 369-384 Issue: 4 Volume: 21 Year: 2020 Month: 10 X-DOI: 10.1080/15427560.2019.1692845 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692845 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:369-384 Template-Type: ReDIF-Article 1.0 Author-Name: Xuechen Gao Author-X-Name-First: Xuechen Author-X-Name-Last: Gao Author-Name: Xuewu (Wesley) Wang Author-X-Name-First: Xuewu Author-X-Name-Last: (Wesley) Wang Author-Name: Zhipeng Yan Author-X-Name-First: Zhipeng Author-X-Name-Last: Yan Title: Attention: Implied Volatility Spreads and Stock Returns Abstract: Using a new and direct measure of investor attention generated from the SEC’s EDGAR log files, we revisit the stock return predictability of call-put implied volatility spread through the lens of investor attention. We find that as investor attention heightens, the volatility spread return predictability becomes more pronounced, providing favorable evidence for the informed trading hypothesis as opposed to the mispricing hypothesis. More importantly, we document the construction and profitability of spread-and-high-attention portfolios. A portfolio that goes long on stocks with the highest investor attention and the highest volatility spread and short on stocks with the highest attention and the lowest volatility spread generates a Fama-French 5-factor monthly alpha of 2.43%. Journal: Journal of Behavioral Finance Pages: 385-398 Issue: 4 Volume: 21 Year: 2020 Month: 10 X-DOI: 10.1080/15427560.2019.1692846 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1692846 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:385-398 Template-Type: ReDIF-Article 1.0 Author-Name: Gunter Löffler Author-X-Name-First: Gunter Author-X-Name-Last: Löffler Title: Does the Value Premium Decline with Investor Interest in Value? Abstract: I approximate the interest that value investing attracts through the frequency with which terms such as “book-to-market ratio” appear in the corpus of books scanned by Google. Following the years in which investor interest in value is relatively high, the realized value premium is found to be below average. On the other hand, there is no evidence that secular trends in interest have an impact on the value premium. The results therefore do not support the hypothesis that the value effect disappears once investors have become aware of it. Journal: Journal of Behavioral Finance Pages: 399-411 Issue: 4 Volume: 21 Year: 2020 Month: 10 X-DOI: 10.1080/15427560.2020.1716232 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716232 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:399-411 Template-Type: ReDIF-Article 1.0 Author-Name: Jordan Wilcoxson Author-X-Name-First: Jordan Author-X-Name-Last: Wilcoxson Author-Name: Lendie Follett Author-X-Name-First: Lendie Author-X-Name-Last: Follett Author-Name: Sean Severe Author-X-Name-First: Sean Author-X-Name-Last: Severe Title: Forecasting Foreign Exchange Markets Using Google Trends: Prediction Performance of Competing Models Abstract: Foreign exchange markets affect a variety of humans and businesses worldwide and there is a wide array of literature aimed at providing more accurate forecasts of their movement. In an attempt to quantify human expectations, Google query search terms related to foreign exchange markets are used to help explain and predict foreign exchange rates between the United States’ dollar and ten other currencies during the time period of January 2004 and August 2018. We find evidence that, while Google Trends can be helpful in prediction, it is necessary to implement some sort of shrinkage or sparsity scheme on the coefficients. Journal: Journal of Behavioral Finance Pages: 412-422 Issue: 4 Volume: 21 Year: 2020 Month: 10 X-DOI: 10.1080/15427560.2020.1716233 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716233 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:412-422 Template-Type: ReDIF-Article 1.0 Author-Name: Jitka Hilliard Author-X-Name-First: Jitka Author-X-Name-Last: Hilliard Author-Name: Arun Narayanasamy Author-X-Name-First: Arun Author-X-Name-Last: Narayanasamy Author-Name: Shen Zhang Author-X-Name-First: Shen Author-X-Name-Last: Zhang Title: The Role of Market Sentiment in Asset Allocations and Stock Returns Abstract: The authors investigate the role of mutual fund flows in incorporating market sentiment into asset prices. They show that retail investors adjust their investments among mutual fund categories in response to changes in market sentiment. Consistent with sentiment-induced price pressure through fund flows, they further find that firms favored by mutual funds, such as large-cap, dividend payers, and firms with high institutional ownership are sensitive to market sentiment. The authors construct a pricing factor representing sentiment risk and find that the sentiment factor is significant in standard asset pricing models and robust to various sorting procedure. Journal: Journal of Behavioral Finance Pages: 423-441 Issue: 4 Volume: 21 Year: 2020 Month: 10 X-DOI: 10.1080/15427560.2019.1663854 File-URL: http://hdl.handle.net/10.1080/15427560.2019.1663854 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:423-441 Template-Type: ReDIF-Article 1.0 Author-Name: Jian Chen Author-X-Name-First: Jian Author-X-Name-Last: Chen Author-Name: Yixiao Zhou Author-X-Name-First: Yixiao Author-X-Name-Last: Zhou Author-Name: Zhen Qi Author-X-Name-First: Zhen Author-X-Name-Last: Qi Title: Content and Characteristics of Private in-House Meetings Abstract: We investigate characteristics of private in-house meetings by analyzing 7,369 records of Chinese-listed companies’ meetings. Using meeting content, we investigate four characteristics: number and heterogeneity of external participants, communication depth, communication breadth, and importance attributed to communication by executives. An increase in the number of institutional investors attending an in-house meeting increases depth and breadth of communication, as well as the importance attributed to it by executives. Participation of public funds, securities companies’ research teams, and private equity funds increases the depth of communication, while public funds enhance its breadth. Executives of listed companies treat different types of investors differently. Journal: Journal of Behavioral Finance Pages: 442-455 Issue: 4 Volume: 21 Year: 2020 Month: 10 X-DOI: 10.1080/15427560.2020.1716231 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716231 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:442-455 Template-Type: ReDIF-Article 1.0 Author-Name: James Cicon Author-X-Name-First: James Author-X-Name-Last: Cicon Author-Name: Jonathan Clarke Author-X-Name-First: Jonathan Author-X-Name-Last: Clarke Author-Name: Stephen P. Ferris Author-X-Name-First: Stephen P. Author-X-Name-Last: Ferris Author-Name: Narayanan Jayaraman Author-X-Name-First: Narayanan Author-X-Name-Last: Jayaraman Title: Managerial Expectations of Synergy and the Performance of Acquiring Firms: The Contribution of Soft Data Abstract: This study examines whether the “soft” information present in merger and acquisition (M&A) announcement press releases contains incrementally valuable news relative to traditional “hard” data. Using the methodology of Loughran and McDonald [2011], we construct measures of synergy expectations and managerial optimism for more than 1,200 M&A announcements over the period 1995–2007. We find that synergy expectations are positively related to announcement period returns, longer-run performance, and the market's reaction to quarterly earnings announcements. Managerial optimism is insignificant for explaining a merger's subsequent performance. We conclude that the soft information contained in M&A announcements concerning synergy expectations can provide useful information to investors. Journal: Journal of Behavioral Finance Pages: 161-175 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.941060 File-URL: http://hdl.handle.net/10.1080/15427560.2014.941060 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:161-175 Template-Type: ReDIF-Article 1.0 Author-Name: Ming-Yuan (Leon) Li Author-X-Name-First: Ming-Yuan (Leon) Author-X-Name-Last: Li Author-Name: Jyong-Sian Wu Author-X-Name-First: Jyong-Sian Author-X-Name-Last: Wu Title: Analysts’ Forecast Dispersion and Stock Returns: A Quantile Regression Approach Abstract: Prior research has not provided conclusive evidence on the association between analysts’ forecast dispersion and subsequent stock returns. Since inferences from prior studies may be confounded by research design choices, we use the quantile regression (QR) approach and assess the hidden non-monotonic relations between dispersion and stock returns within a broader sample. The empirical results show that dispersion is negatively associated with subsequent stock returns when the latter is in lower quantiles. In contrast, when the stock returns are in high quantiles, dispersion is positively associated with subsequent stock returns. Moreover, the association between dispersion and stock returns is trivial when the mid-range return quantiles are concerned. These non-uniform connections between dispersion and stock returns reflect the different status of overpricing correction process. Our findings help to reconcile the mixed results reported by prior research concerning the relation between analysts’ forecast dispersion and subsequent stock returns. Journal: Journal of Behavioral Finance Pages: 175-183 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.942420 File-URL: http://hdl.handle.net/10.1080/15427560.2014.942420 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:175-183 Template-Type: ReDIF-Article 1.0 Author-Name: Seung Woog Kwag Author-X-Name-First: Seung Woog Author-X-Name-Last: Kwag Title: A Behavioral Shift in Earnings Response After Regulation FD Abstract: The Regulation Fair Disclosure of 1999 (FD) intends to promote the full and fair disclosure of price information and further prevent insider trading. As a result, the public investors are expected to be empowered with more quality and relevant information. This study examines a behavioral shift in investor reaction to quarterly earnings announcements after the passage of the FD due to the expected improvement in information asymmetry. The empirical findings suggest that investors show a behavioral shift after the FD in response to biased earnings forecasts. Investors become more active in that they place a discount on optimistic earnings forecasts during the earnings announcement period. It is less obvious that they place a premium on pessimistic forecasts. Another coherent finding is that investors attempt to correct for the announcement-period mis-adjustments during the post-announcement period. Journal: Journal of Behavioral Finance Pages: 184-194 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.939749 File-URL: http://hdl.handle.net/10.1080/15427560.2014.939749 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:184-194 Template-Type: ReDIF-Article 1.0 Author-Name: Manuel Ammann Author-X-Name-First: Manuel Author-X-Name-Last: Ammann Author-Name: Roman Frey Author-X-Name-First: Roman Author-X-Name-Last: Frey Author-Name: Michael Verhofen Author-X-Name-First: Michael Author-X-Name-Last: Verhofen Title: Do Newspaper Articles Predict Aggregate Stock Returns? Abstract: We analyze whether newspaper content can predict aggregate future stock returns. Our study is based on articles published in the Handelsblatt, a leading German financial newspaper, from July 1989 to March 2011. We summarize newspaper content in a systematic way by constructing word-count indices for a large number of words. Word-count indices are instantly available and potentially valuable financial indicators. Our main finding is that newspaper articles have provided information valuable for predicting future DAX returns in and out of sample. We find evidence that the predictive power of newspaper content has increased over time, particularly since 2000. Our results suggest that a cluster analysis approach increases the predictive power of newspaper articles substantially. Journal: Journal of Behavioral Finance Pages: 195-213 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.941061 File-URL: http://hdl.handle.net/10.1080/15427560.2014.941061 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:195-213 Template-Type: ReDIF-Article 1.0 Author-Name: Olivier Mesly Author-X-Name-First: Olivier Author-X-Name-Last: Mesly Title: The Core of Predation: The Predatory Core—Finding the Neurobiological Center of Financial Predators and Preys Abstract: This paper proposes a theoretical view of the financial predator and prey's brain, with the hypothalamus being the core cerebral structure driving financial predatory behaviors. This model will hopefully help opening doors to possible better management as it appears that the number of financial scandals that have their source in the malevolent behavior of a selected few keeps rising. Indeed, neuromarketing is an emerging trend but lots of work remains to be done. This paper suggests that future research could be oriented toward the understanding of the predatory core in human behavior, more specifically referred to as the black box of consumers. Journal: Journal of Behavioral Finance Pages: 214-225 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.942865 File-URL: http://hdl.handle.net/10.1080/15427560.2014.942865 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:214-225 Template-Type: ReDIF-Article 1.0 Author-Name: Maria Andersson Author-X-Name-First: Maria Author-X-Name-Last: Andersson Author-Name: Martin Hedesström Author-X-Name-First: Martin Author-X-Name-Last: Hedesström Author-Name: Tommy Gärling Author-X-Name-First: Tommy Author-X-Name-Last: Gärling Title: A Social-Psychological Perspective on Herding in Stock Markets Abstract: A social-psychological perspective conceives of herding in stock markets as informative social influence resulting from heuristic or systematic information processing. In three laboratory experiments employing undergraduates we apply this perspective to investigate factors that prevent herd influence that would lead to inaccurate predictions of stock prices. In Experiment 1, we show that an economic reward for making the same predictions as the herd increases the influence of a majority but not the influence of a minority, and that an individual economic reward for making accurate predictions reduces the influence of the majority. In Experiment 2, we show a reduced influence of a majority herd's inaccurate predictions when requiring assessments of the accuracy of the majority herd´s predictions as compared to requiring judgments of their consistency. Experiment 3 shows that a lower volatility of stock prices reduces the influence of a majority herd´s inaccurate predictions. Journal: Journal of Behavioral Finance Pages: 226-234 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.941062 File-URL: http://hdl.handle.net/10.1080/15427560.2014.941062 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:226-234 Template-Type: ReDIF-Article 1.0 Author-Name: Kathryn Kadous Author-X-Name-First: Kathryn Author-X-Name-Last: Kadous Author-Name: William B. Tayler Author-X-Name-First: William B. Author-X-Name-Last: Tayler Author-Name: Jane M. Thayer Author-X-Name-First: Jane M. Author-X-Name-Last: Thayer Author-Name: Donald Young Author-X-Name-First: Donald Author-X-Name-Last: Young Title: Individual Characteristics and the Disposition Effect: The Opposing Effects of Confidence and Self-Regard Abstract: We conduct two experiments to examine potential causes of the disposition effect. In Experiment 1, we rule out beliefs in mean reversion as a cause of the disposition effect. Although a belief in the mean reversion of stock prices should be independent of whether an investor owns or only follows the stock, we show only investors who own the stock behave as though prices will reverse. In Experiment 2, participants buy and sell securities over multiple periods. We find that self-regard and investing confidence (two types of self-esteem) have opposing influences on investors’ tendency to hold losing investments. Investors with lower self-regard hold losing investments longer than those with higher self-regard, and investors with higher confidence hold losing investments longer than those with lower confidence. We focus on investors’ tendency to hold losing stocks too long because prior research suggests the gain versus loss sides of the disposition effect are driven by different biases. Journal: Journal of Behavioral Finance Pages: 235-250 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.939748 File-URL: http://hdl.handle.net/10.1080/15427560.2014.939748 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:235-250 Template-Type: ReDIF-Article 1.0 Author-Name: Alan Beilis Author-X-Name-First: Alan Author-X-Name-Last: Beilis Author-Name: Jan W. Dash Author-X-Name-First: Jan W. Author-X-Name-Last: Dash Author-Name: Jacqueline Volkman Wise Author-X-Name-First: Jacqueline Volkman Author-X-Name-Last: Wise Title: Psychology, Stock/FX Trading and Option Prices Abstract: The financial crisis of 2008 had many putative causes where psychology was an important driver for human decisions. However, quantitative financial models have no “knobs” to dial psychology parameters, and so arguably cannot possibly cope with financial crises. Here we take a first step by considering how a particular aspect of psychology can influence an underlying security and subsequent option prices, in a quantitative model. We investigate how psychological regret and fear impact trading selling behavior and induces changes in underlying security prices. We then consider the resulting changes in option prices with empirical evidence. Journal: Journal of Behavioral Finance Pages: 251-268 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.943227 File-URL: http://hdl.handle.net/10.1080/15427560.2014.943227 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:251-268 Template-Type: ReDIF-Article 1.0 Author-Name: Tzu-Yi Yang Author-X-Name-First: Tzu-Yi Author-X-Name-Last: Yang Author-Name: Yu-Tai Yang Author-X-Name-First: Yu-Tai Author-X-Name-Last: Yang Title: Determinants of Inflow to Mutual Funds: Criterion and Methodology for Their Application to the Mainland China Market Abstract: This study is based on the Froot, O’Connell, and Seasholes [2001] and Hsieh, Yang and Yu [2008] as foundations to study which reasons and control factors cause herding behavior of mutual fund inflows. The study uses the most popular Asian emerging market, China, as the sample to determine the real attractive reason behind the mutual fund inflows to China. The significant determinant of the mutual fund inflows to China is stock returns for both Shanghai and Shenzhen A stock markets. Journal: Journal of Behavioral Finance Pages: 269-276 Issue: 3 Volume: 15 Year: 2014 Month: 7 X-DOI: 10.1080/15427560.2014.943228 File-URL: http://hdl.handle.net/10.1080/15427560.2014.943228 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:269-276 Template-Type: ReDIF-Article 1.0 Author-Name: Hammad Siddiqi Author-X-Name-First: Hammad Author-X-Name-Last: Siddiqi Title: Anchoring-Adjusted Capital Asset Pricing Model Abstract: What happens when the capital asset pricing model is adjusted for the anchoring and adjustment heuristic of Tversky and Kahneman [1974]? The surprising finding is that adjusting the capital asset pricing model for anchoring provides a plausible unified framework for understanding almost all of the key asset pricing anomalies. The anomalies captured in the theoretical framework include the well-known size and value effects, high alpha of low beta stocks, accruals, low volatility anomaly, momentum effect, stock splits, and reverse stock splits. The market equity premium is also larger with anchoring. This suggests that the anchoring-adjusted capital asset pricing model may provide the needed unifying structure to behavioral finance. Journal: Journal of Behavioral Finance Pages: 249-270 Issue: 3 Volume: 19 Year: 2018 Month: 7 X-DOI: 10.1080/15427560.2018.1378218 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1378218 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:3:p:249-270 Template-Type: ReDIF-Article 1.0 Author-Name: W. Brooke Elliot Author-X-Name-First: W. Brooke Author-X-Name-Last: Elliot Author-Name: Kristina Marie Rennekamp Author-X-Name-First: Kristina Marie Author-X-Name-Last: Rennekamp Author-Name: Brian J. White Author-X-Name-First: Brian J. Author-X-Name-Last: White Title: The Paradoxical Behavioral Effects of a Directional Goal on Investors' Risk Perceptions and Valuation Judgments Abstract: Market participants who evaluate risk often have a preference or goal for positive company performance. The authors test how such a directional goal affects risk perceptions and the relation between risk perceptions and assessments of value in an investment context. Compared with investors without directional goals—who, consistent with prior behavioral research, focus on negative aspects of risk—the authors find that those with directional goals assess risk as being more symmetric (i.e., they are less focused on downside risk). However, investors with directional goals are also less likely to consider risk when assessing value. Taken together, these results suggest that a directional goal reduces one behavioral effect identified in prior literature (the tendency to focus on downside risk), but creates another behavioral effect (ignoring risk in assessing value). The authors discuss implications for standard setters and regulators seeking to communicate risk information to market participants. Journal: Journal of Behavioral Finance Pages: 271-290 Issue: 3 Volume: 19 Year: 2018 Month: 7 X-DOI: 10.1080/15427560.2018.1381961 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1381961 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:3:p:271-290 Template-Type: ReDIF-Article 1.0 Author-Name: Christopher Yost-Bremm Author-X-Name-First: Christopher Author-X-Name-Last: Yost-Bremm Author-Name: Emily Huang Author-X-Name-First: Emily Author-X-Name-Last: Huang Title: Merger Speculation in Financial Media: The Valuation of Investigative Reporting Abstract: The authors study abnormal returns and volume in the days surrounding takeover speculation by financial media. Significantly positive price and volume responses 2 days after publication are observed. While most of this effect dissipates shortly thereafter, some excess returns remain impounded into the stock price. A study of the ex post takeover probabilities suggests that a positive response is justified, as takeover probabilities for such firms subsequently increase. This evidence is consistent with the idea that financial media speculation can facilitate the release of useful private information to shareholders. However, significantly positive excess returns and volume in the few days before publication also suggests that certain shareholders may benefit disproportionately. Journal: Journal of Behavioral Finance Pages: 291-307 Issue: 3 Volume: 19 Year: 2018 Month: 7 X-DOI: 10.1080/15427560.2018.1381960 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1381960 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:3:p:291-307 Template-Type: ReDIF-Article 1.0 Author-Name: Ning Du Author-X-Name-First: Ning Author-X-Name-Last: Du Author-Name: David V. Budescu Author-X-Name-First: David V. Author-X-Name-Last: Budescu Title: How (Over) Confident Are Financial Analysts? Abstract: Extensive research has been devoted to the quality of analysts' earnings forecasts. The common finding is that analysts' forecasts are not very accurate. Prior studies have tended to focus on the mean of forecasts and measure accuracy using various summaries of forecast errors. The present study sheds new light on the accuracy of analysts' forecasts, by measuring how well calibrated these forecasts are. The authors follow the tradition of calibration studies in psychological literature and measure the degree of calibration by the hit rate. They analyze a year's worth of data from the Institutional Brokers Estimate System database, which includes over 200,000 annual earnings forecasts made by over 6,000 analysts for over 5,000 companies. By using different ways to convert analysts' point estimates of earnings into a range of values, the authors establish the bounds that are necessary to determine the hit rates, and examine to what extent the actual earnings announced by the companies are bracketed by these intervals. These hit rates provide a more complete picture of the accuracy of the forecasts. Journal: Journal of Behavioral Finance Pages: 308-318 Issue: 3 Volume: 19 Year: 2018 Month: 7 X-DOI: 10.1080/15427560.2018.1405004 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1405004 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:3:p:308-318 Template-Type: ReDIF-Article 1.0 Author-Name: Evanthia K. Zervoudi Author-X-Name-First: Evanthia K. Author-X-Name-Last: Zervoudi Title: Value Functions for Prospect Theory Investors: An Empirical Evaluation for U.S. Style Portfolios Abstract: The main aim of this article is to provide a general behavioral analysis that proposes a series of different value functions for prospect theory (PT) investors incorporated into behavioral reward-risk models that are finally solved so as to provide some specific optimal solutions. To do this, general behavioral reward-risk models, which contain all the basic elements of the PT, are first set up. Two reward and risk measures, the upper partial moment and the lower partial moment, are subsequently used to create the various value functions. The technical difficulties arising during the behavioral maximization process are overpassed by adapting the Rubinstein [1982] algorithm. The results show that agents differentiate their behavior according to their type of preferences (S-shaped, reverse S-shaped, kinked convex, and kinked concave value function) but they seem to always prefer small capitalization and high positively skewed value stock portfolios. Probability distortion also affects the optimal solutions of the problem, independently of the employing weighting functional form; when subjective probabilities are employed the optimal weights of the most risky positively skewed assets seem to increase. Probability distortion has an additional important effect on optimal perspective values of the problem driving to a significant increase. Journal: Journal of Behavioral Finance Pages: 319-333 Issue: 3 Volume: 19 Year: 2018 Month: 7 X-DOI: 10.1080/15427560.2018.1405005 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1405005 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:3:p:319-333 Template-Type: ReDIF-Article 1.0 Author-Name: Lisa R. Anderson Author-X-Name-First: Lisa R. Author-X-Name-Last: Anderson Author-Name: Beth A. Freeborn Author-X-Name-First: Beth A. Author-X-Name-Last: Freeborn Author-Name: Jason P. Hulbert Author-X-Name-First: Jason P. Author-X-Name-Last: Hulbert Title: Behavioral Factors in Equity Allocation Decisions: A Large-Scale Experimental Study With Context Abstract: Traditional models of rational behavior struggle to explain how individuals allocate their money over a variety of financial instruments, including annuities, the stock market, and risk-free bonds. This study uses a large and diverse data set from an investment experiment that is rich in context and captures some important features of actual financial decision making. The focus of the article is to build on the literature documenting behavioral explanations for investment choices by studying the equity allocation decision across different financial tools. The authors find evidence that risk aversion, inertia, and excessive extrapolation are associated with investment behavior even when it is clear that return rates are independent across decision-making periods. Further, subjects have an asymmetric response to positive versus negative returns. In addition to having a novel experimental design, the authors also examine behavior before and after the recent financial crisis. The authors find that the financial crisis indirectly affects the first-stage annuity take-up rate in the experiments vis-à-vis a higher average level of risk aversion after the start of the crisis. Journal: Journal of Behavioral Finance Pages: 334-348 Issue: 3 Volume: 19 Year: 2018 Month: 7 X-DOI: 10.1080/15427560.2018.1405006 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1405006 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:3:p:334-348 Template-Type: ReDIF-Article 1.0 Author-Name: Austin Murphy Author-X-Name-First: Austin Author-X-Name-Last: Murphy Author-Name: Liang Fu Author-X-Name-First: Liang Author-X-Name-Last: Fu Title: The Effect of Confidence in Valuation Estimates on Arbitrager Behavior and Market Prices Abstract: The authors develop a complete framework for optimizing trading decisions that incorporates investors' confidence in their valuation estimates. Quantified estimates of arbitragers' uncertainty about their appraisals of asset values are shown to be extractable from market prices alone. An empirical investigation over the 1977–2015 interval indicated that confidence levels exhibit persistence subject to mean reversion, with a positive relationship found with the magnitude of existing mispricings. Higher returns are discovered to long (short) arbitrage of an asset, whose intrinsic value is higher (lower) than the market price, after rises in uncertainty among informed investors. Journal: Journal of Behavioral Finance Pages: 349-363 Issue: 3 Volume: 19 Year: 2018 Month: 7 X-DOI: 10.1080/15427560.2018.1378219 File-URL: http://hdl.handle.net/10.1080/15427560.2018.1378219 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:3:p:349-363 Template-Type: ReDIF-Article 1.0 Author-Name: Sivan Riff Author-X-Name-First: Sivan Author-X-Name-Last: Riff Author-Name: Yossi Yagil Author-X-Name-First: Yossi Author-X-Name-Last: Yagil Title: Home Bias and the Power of Branding Abstract: The tendency to overinvest in local assets, which is called “home bias,” has been an enigma fascinating economists for many years. This study challenges the effect of home bias and suggests that the high global branding of companies might have an equal or even stronger influence compared with the influence of location. Using experimental methodology, the authors examine the effects of branding and location on the willingness of investors to invest in a certain asset. First, the results show that people prefer to invest in local compared with foreign assets. Second, the authors find that the effect of location is stronger within low-branded companies, while in high-branded companies, the effect of location is not significant. Third, the results show that people prefer to invest in high-branded companies than in low-branded companies and that the effect of branding is stronger within foreign companies, while the effect of branding is weaker within local companies. Last, the effect of branding is as strong as the effect of location. Journal: Journal of Behavioral Finance Pages: 1-9 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1716230 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716230 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:1-9 Template-Type: ReDIF-Article 1.0 Author-Name: Franklin J. Parker Author-X-Name-First: Franklin J. Author-X-Name-Last: Parker Title: A Goals-Based Theory of Utility Abstract: Theoretical frameworks to date have prescribed how an investor should allocate wealth within mental accounts. However, there is no fully cohesive solution to prescribe how an investor should rationally allocate resources across mental accounts. It is the aim of this discussion to fill that theoretical gap. We present a framework which can be used to rationally allocate resources both within and across mental accounts or goals. We then compare and contrast this method with mean-variance optimization and behavioral portfolio theory, showing that both are stochastically dominated by the goals-based utility framework. In further analysis of empirical validity, we discuss the Samuelson Paradox, Friedman-Savage puzzle, and probability weighting functions. Journal: Journal of Behavioral Finance Pages: 10-25 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1716359 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716359 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:10-25 Template-Type: ReDIF-Article 1.0 Author-Name: Liron Reiter Gavish Author-X-Name-First: Liron Reiter Author-X-Name-Last: Gavish Author-Name: Mahmoud Qadan Author-X-Name-First: Mahmoud Author-X-Name-Last: Qadan Author-Name: Joseph Yagil Author-X-Name-First: Joseph Author-X-Name-Last: Yagil Title: Net Buyers of Attention-Grabbing Stocks? Who Exactly Are They? Abstract: The literature has established that retail investors are “net buyers” of attention-grabbing stocks. In this study, the authors utilize a unique dataset of actual information about 290,000 household investment accounts and track their “net buying” decisions with a focus on their economic and demographic characteristics. Unlike previous research, the authors focus not only on net buyers of attention-grabbing stocks, but also on net sellers of such stocks. They find that factors such as financial experience, wealth, consulting with advisors, and other individual characteristics, indicative of investors’ sophistication, account for the differences in the net buying decision. Specifically, the authors find that more trading experience and a lower tendency for home bias are associated with net selling during months when stocks attract a great deal of attention, and with net buying during months when they are paid less attention. The authors document that investors who trade in months of less attention are more experienced, engage more in complex trading, have less of a home bias tendency, are wealthier, and have a higher income than those who trade during the highest attention-grabbing months. Finally, the use of financial advice varies not only between households, but also between months in which stocks receive a great deal or little attention. Journal: Journal of Behavioral Finance Pages: 26-45 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1716360 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716360 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:26-45 Template-Type: ReDIF-Article 1.0 Author-Name: Qiang Bu Author-X-Name-First: Qiang Author-X-Name-Last: Bu Title: Mutual Fund Alpha: Is It Managerial or Emotional? Abstract: This paper presents an examination on the impact of investor sentiment on mutual fund alpha. Using the Baker and Wurgler index, I find that investor sentiment plays an important role in explaining fund alpha, and the outperforming probability of funds rises as investor sentiment rises. Also, benchmark models adjusted by investor sentiment level can better explain the occurrence of fund alpha. This finding is confirmed by the cumulative distribution function (CDF) of the t values of the alpha estimates. Thus, the complete story of mutual fund alpha would be incomplete without incorporating investor sentiment. Journal: Journal of Behavioral Finance Pages: 46-55 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1716361 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716361 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:46-55 Template-Type: ReDIF-Article 1.0 Author-Name: Tao Chen Author-X-Name-First: Tao Author-X-Name-Last: Chen Title: Does Country Matter to Investor Herding? Evidence from an Intraday Analysis Abstract: This study uses high-frequency intraday data to investigate country-level intraday herding behavior among global market investors and finds strong evidence of significant herding at the country level. Specifically, we find that traders tend to follow each other from one country to another. Moreover, we find that country-level herding is a combination of informed and uninformed herding, and that the contribution of uninformed herding is approximately five times greater than that of its informed counterpart. Informed country-level herding is primarily motivated by correlated signals, whereas uninformed country-level herding is influenced by momentum trading, style investing, and market pressure. Journal: Journal of Behavioral Finance Pages: 56-64 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1716760 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716760 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:56-64 Template-Type: ReDIF-Article 1.0 Author-Name: Ela Ostrovsky-Berman Author-X-Name-First: Ela Author-X-Name-Last: Ostrovsky-Berman Title: Can CEOs Change the Market Perception by Giving Interviews to the Media? Abstract: This study examines market reactions to press coverage of public companies in general, and to media interviews given by CEOs in particular. Using a unique database, that includes press articles and interviews with CEOs of 378 S&P companies, I find that press coverage is followed by significant abnormal returns in the short term. Further, the reaction to negative news is slightly stronger than the reaction to positive news. Moreover, I show that interviews with CEOs increase abnormal returns. CEOs’ reputation has a positive effect particularly where negative news is commented on by very highly reputed CEOs. Journal: Journal of Behavioral Finance Pages: 65-73 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1716761 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1716761 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:65-73 Template-Type: ReDIF-Article 1.0 Author-Name: Martin Walther Author-X-Name-First: Martin Author-X-Name-Last: Walther Author-Name: Markus Münster Author-X-Name-First: Markus Author-X-Name-Last: Münster Title: Conditional Risk Premiums and the Value Function of Prospect Theory Abstract: This paper examines whether stock returns are consistent with the value function of prospect theory. We find that beta given a gain yields positive conditional premiums on returns while beta given a loss yields negative conditional premiums. This reflects the fact that the value function is concave for gains and convex for losses, implying risk-averse behavior for gains and risk-seeking behavior for losses respectively. Furthermore, the absolute value of the premiums is greater for losses, which is in line with the value function being steeper in this state. These new findings provide indication that investors behave according to prospect theory. Journal: Journal of Behavioral Finance Pages: 74-83 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1735390 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1735390 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:74-83 Template-Type: ReDIF-Article 1.0 Author-Name: Tommy Gärling Author-X-Name-First: Tommy Author-X-Name-Last: Gärling Author-Name: Dawei Fang Author-X-Name-First: Dawei Author-X-Name-Last: Fang Author-Name: Martin Holmen Author-X-Name-First: Martin Author-X-Name-Last: Holmen Author-Name: Patrik Michaelsen Author-X-Name-First: Patrik Author-X-Name-Last: Michaelsen Title: Fast and Slow Investments in Asset Markets: Influences on Risk Taking Abstract: The aim is to investigate whether elevated risk taking in asset market experiments driven by rank-based performance incentives decrease if removing a time limit on choices and minimizing complexity of strategic optimization. In a scenario experiment, business school students (n = 123) acting as investment managers in a fund company make investments at self-paced rates. The results show that investments are influenced by rank-based compensations implemented as a relative comparison standard but not that risk taking is elevated. The motive to minimize losses relative to others appear to counteract risk taking, particularly if poor performance is penalized by reducing the fixed income. Journal: Journal of Behavioral Finance Pages: 84-96 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1747071 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1747071 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:84-96 Template-Type: ReDIF-Article 1.0 Author-Name: Hongqi Liu Author-X-Name-First: Hongqi Author-X-Name-Last: Liu Author-Name: Karolina Krystyniak Author-X-Name-First: Karolina Author-X-Name-Last: Krystyniak Title: Investor Attention and Merger Announcements Abstract: This article analyzes investor attention around merger announcements and its impact on price reactions and investor trading activity. The authors find that (1) investor attention to target firms increases significantly during the preannouncement period, especially when merger-related news are present; (2) investor attention to both acquirer and target firms increases on the announcement day but increases more for the target firms and large deals; and (3) stock return and abnormal trading volume responses related to announcement are more pronounced when investor attention is higher. Overall, the results suggest that investors anticipate merger announcements and that investor attention affects how investors incorporate information into asset prices. Journal: Journal of Behavioral Finance Pages: 97-112 Issue: 1 Volume: 22 Year: 2021 Month: 1 X-DOI: 10.1080/15427560.2020.1748632 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1748632 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:1:p:97-112 Template-Type: ReDIF-Article 1.0 Author-Name: Patrick Schotanus Author-X-Name-First: Patrick Author-X-Name-Last: Schotanus Author-Name: Aaron Schurger Author-X-Name-First: Aaron Author-X-Name-Last: Schurger Title: Spontaneous Volatility: Fooled by Reflexive Randomness Abstract: We draw a parallel between noise trading and the “readiness potential” in neuroscience. The latter can be explained in terms of neuronal noise accumulation which can tip the scale ahead of voluntary actions, in particular their timing in situations of weak evidence. This principle may apply to trading by technical noise traders. Based on our initial findings we propose that excess volatility, as a measure of price noise, indirectly reflects the signature of collective neuronal noise. In other words, we’ve potentially identified an internal contributor to Black’s “cumulative noise”, with neurons and prices reflexively participating in a joint random walk. Journal: Journal of Behavioral Finance Pages: 201-213 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1771715 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1771715 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:201-213 Template-Type: ReDIF-Article 1.0 Author-Name: Brian Kluger Author-X-Name-First: Brian Author-X-Name-Last: Kluger Author-Name: Jennifer Miele Author-X-Name-First: Jennifer Author-X-Name-Last: Miele Title: An Experiment on Diversification and Path Dependence Abstract: In an experiment where subjects can allocate their wealth between cash and two risky assets, we analyze path-dependent portfolio choices. The experiment is designed to isolate cases where subjects have no prior experiences, and cases where subjects experience isolated changes in wealth or relative prices. We find that subjects tend to be less diversified after wealth or relative price changes, but that the result is much stronger for relative price changes. This erosion in portfolio diversification after relative price changes mainly stems from the choices of subjects with more diversified positions when there are no prior experiences. Journal: Journal of Behavioral Finance Pages: 155-169 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1751628 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1751628 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:155-169 Template-Type: ReDIF-Article 1.0 Author-Name: Dung (June) Pham Author-X-Name-First: Dung (June) Author-X-Name-Last: Pham Author-Name: Thanh Nguyen Author-X-Name-First: Thanh Author-X-Name-Last: Nguyen Author-Name: Trang Minh Pham Author-X-Name-First: Trang Minh Author-X-Name-Last: Pham Author-Name: Hari Adhikari Author-X-Name-First: Hari Author-X-Name-Last: Adhikari Title: Corporate Divestiture Decisions and Long-Run Performance Abstract: We examine the post-divestiture long-run performance of two different choices of corporate divestiture, asset sell-offs versus equity carve-outs, and find that the choice of divestiture methods has important implications for the post-divestiture long-run performance. Our findings show that the post-divestiture long-run abnormal returns of sell-off parents are significantly higher than those of the carve-out parents. Furthermore, we find a positive relationship between the post-divestiture long-run returns and the diversification discount. The effect of the diversification discount is weaker for divesting parents with higher levels of R&D. Our results also provide evidence that a firm’s pre-divestiture number of segments, its unrelatedness to the divested unit, and its level of asymmetric information are positively related to the probability of choosing the asset sell-off method. Journal: Journal of Behavioral Finance Pages: 126-140 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1735389 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1735389 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:126-140 Template-Type: ReDIF-Article 1.0 Author-Name: Evangelos Vasileiou Author-X-Name-First: Evangelos Author-X-Name-Last: Vasileiou Title: Are Markets Efficient? A Quantum Mechanics View Abstract: In this paper we adopt some ideas from Quantum mechanics, and particularly the well-known Schrödinger’s cat (1935) thought experiment in order to present some new views on the big question whether the markets are efficient or not. There are two main conflicting approaches in financial economics: the behavioral approach and the Efficient Market Hypothesis (EMH). The behavioral approach usually uses psychological theories in order to explain what the Efficient Market Hypothesis (EMH) cannot. However, behavioral finance does not have a specific model to suggest, and this is one major counterargument put forth by EMH supporters. Using the well-known CUBA fund case as an example, we show that EMH seems to be in superposition (simultaneously correct and incorrect), but suddenly collapses into one configuration. These dominant economics approaches are supplementary, so it is better for scholars that support either the EMH or behavioral finance to incorporate their ideas into one model, than to continue debating the accuracy of the EMH. The Quantum approach enables us to distinguish the unexpectable from the irrational. Adopting the quantum way of thinking we can build more accurate models and work toward the goal that most scholars pursue: to understand how the world works. Journal: Journal of Behavioral Finance Pages: 214-220 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1772260 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1772260 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:214-220 Template-Type: ReDIF-Article 1.0 Author-Name: Selin Duz Tan Author-X-Name-First: Selin Author-X-Name-Last: Duz Tan Author-Name: Oktay Tas Author-X-Name-First: Oktay Author-X-Name-Last: Tas Title: Social Media Sentiment in International Stock Returns and Trading Activity Abstract: The authors investigate the impact of social media on S&P index constituents for U.S., European, and emerging markets with the international investor perspective using firm-specific Twitter sentiment and activity. The findings indicate that Twitter activity and sentiment are associated with trading volume and returns, and predicts subsequent-day trading volume. The authors find that firm-specific Twitter sentiment contains information for predicting stock returns and this predictive power remains significant after controlling news sentiment. The positive tone of Twitter sentiment is more pronounced in small and emerging market firms, which is consistent with the literature stating that small firms are hard to value and emerging market firms contain high information asymmetry. From a practical perspective, investors could potentially use social media sentiment in trading strategies. Journal: Journal of Behavioral Finance Pages: 221-234 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1772261 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1772261 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:221-234 Template-Type: ReDIF-Article 1.0 Author-Name: Kimberly K. Moreno Author-X-Name-First: Kimberly K. Author-X-Name-Last: Moreno Author-Name: Yue (May) Zhang Author-X-Name-First: Yue (May) Author-X-Name-Last: Zhang Title: The Impact of the Big Fish Effect on Investor Reactions to Financial and Nonfinancial Disclosure Abstract: Via two experiments, we examine how management’s flexibility in framing its numerical data affects investor judgments. In specific, we examine whether investors are susceptible to a Big Fish effect where percentage data presented as a larger percentage of a smaller subset is more desirable than percentage data presented as a smaller percentage of a larger subset, holding constant the economic value of both amounts. Our first experiment demonstrates that, after holding the information content constant, highlighting a firm’s larger sales growth in a smaller sector in press release headlines increases investors’ willingness to invest in the firm compared with highlighting the firm’s smaller sales growth in a larger sector. Our second experiment further demonstrates that framing Corporate Social Responsibility (CSR) accomplishments as larger achievements in smaller areas leads to more favorable investor perceptions about the firm’s CSR performance than framing the same accomplishments as smaller achievements in larger areas, particularly when the numerical information is presented with visual images. The findings from this study have important implications for investors, firm management, and regulators. Journal: Journal of Behavioral Finance Pages: 113-125 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1771716 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1771716 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:113-125 Template-Type: ReDIF-Article 1.0 Author-Name: Charles Favreau Author-X-Name-First: Charles Author-X-Name-Last: Favreau Author-Name: Ryan Garvey Author-X-Name-First: Ryan Author-X-Name-Last: Garvey Title: What Causes the Disposition Effect? Evidence from Corporate Insiders Abstract: While most researchers agree on the existence of the disposition effect, questions remain regarding its cause. We investigate several potential theories by examining the trading decisions of corporate insiders. Although insiders exhibit the disposition effect, the odds of a corporate insider repurchasing a losing position are significantly higher than the odds of repurchasing a winning position. We conjecture that the preference of holding onto, and augmenting, losing positions is driven in part by the belief that ‘losers’ will soon revert. This contrarian tendency of insiders seems justified as loser repurchases outperform winner repurchases. Journal: Journal of Behavioral Finance Pages: 189-200 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1768097 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1768097 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:189-200 Template-Type: ReDIF-Article 1.0 Author-Name: Fawad Ahmad Author-X-Name-First: Fawad Author-X-Name-Last: Ahmad Author-Name: Raffaele Oriani Author-X-Name-First: Raffaele Author-X-Name-Last: Oriani Author-Name: Matteo De Angelis Author-X-Name-First: Matteo Author-X-Name-Last: De Angelis Title: Investor’s Intrinsic Motives and the Valence of Word-of-Mouth in Sequential Decision-Making Abstract: An escalation of commitment refers to an individual’s decision to engage in greater risk-taking following prior losses than gains. This behavior was found to be preeminent in situations framed as portfolio decisions. However, there is lack of evidence regarding the underlying mechanism behind an individual’s decision to engage in later high (or low) risk-taking in a loss (or gain) domain. A model was developed based on the connections between prospect theory, self-determination theory and word-of-mouth to provide underlying mechanisms that activate investors’ decisions to engage in later high (or low) risk-taking. We theorized that self- and/or social motives and negative word-of-mouth (NWoM) or positive word-of-mouth (PWoM) would double mediate the effect of prior low (high) risk-taking on later high (low) risk-taking in the loss (gain) domain. Results supported a double mediation effect and indicated that investors have different underlying self- and/or social motives, manifested in NWoM or PWoM, that activate later high (low) risk-taking in the loss (gain) domain. The findings have pertinent implications for advisors wishing to understand underlying self- and/or social motives in order to predict and manage client risk-attitude. The findings also help researchers and analysts to identify patterns in investor behavior that can predict market trends. Journal: Journal of Behavioral Finance Pages: 170-188 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1751630 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1751630 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:170-188 Template-Type: ReDIF-Article 1.0 Author-Name: Douglas Ayres Author-X-Name-First: Douglas Author-X-Name-Last: Ayres Author-Name: Steven Dolvin Author-X-Name-First: Steven Author-X-Name-Last: Dolvin Title: Unfamiliarity Breeds Resentment: Familiarity Bias in Inaugural Credit Ratings Abstract: While a company’s first-time, or inaugural, corporate credit rating should be highly informational, we are concerned that ratings agencies might be impacted by a lack of familiarity with newly rated firms. We examine this issue, finding that ratings agencies issue lower credit ratings for firms being rated for the very first time. We also find that this first-time under-rating moderates as time elapses, is lower for firms with higher financial leverage, and is less pronounced for larger companies, all of which are consistent with familiarity bias. We also examine the equity market impact, finding significant negative price performance surrounding inaugural credit ratings, quantifying the potential economic costs of familiarity bias. Journal: Journal of Behavioral Finance Pages: 141-154 Issue: 2 Volume: 22 Year: 2021 Month: 4 X-DOI: 10.1080/15427560.2020.1751629 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1751629 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:2:p:141-154 Template-Type: ReDIF-Article 1.0 Author-Name: Taniya Ghosh Author-X-Name-First: Taniya Author-X-Name-Last: Ghosh Author-Name: Prashant Mehul Parab Author-X-Name-First: Prashant Mehul Author-X-Name-Last: Parab Author-Name: Sohini Sahu Author-X-Name-First: Sohini Author-X-Name-Last: Sahu Title: Analyzing the Importance of Forward Orientation in Financial Development-Economic Growth Nexus: Evidence from Big Data Abstract: The authors analyze how the citizens’ attitude toward the future, obtained using big data, affects the relationship between the nation’s financial development and economic growth. The relationship between financial development and economic growth has been ambiguous, as the literature supports both positive and negative effects of financial development on economic growth. We find that the individual’s attitude toward the future, as captured by the Future Orientation Index, plays a significant role in affecting this relation. In particular, the Future Orientation Index interacts with financial development and weakens the negative effect of financial development on nation’s economic growth, especially in high-income countries. Journal: Journal of Behavioral Finance Pages: 280-288 Issue: 3 Volume: 22 Year: 2021 Month: 7 X-DOI: 10.1080/15427560.2020.1772795 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1772795 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:3:p:280-288 Template-Type: ReDIF-Article 1.0 Author-Name: John R. Nofsinger Author-X-Name-First: John R. Author-X-Name-Last: Nofsinger Author-Name: Fernando M. Patterson Author-X-Name-First: Fernando M. Author-X-Name-Last: Patterson Author-Name: Corey A. Shank Author-X-Name-First: Corey A. Author-X-Name-Last: Shank Title: On the Physiology of Investment Biases: The Role of Cortisol and Testosterone Abstract: The underlying physiological mechanisms of biases are not well understood. As such, we examine the impact of testosterone and cortisol levels on several commonplace investment biases using realistic trading simulations. Cortisol, the biological marker of stress, is positively related to the disposition effect and portfolio turnover, which is consistent with the relation between judgment errors and stress in social settings. Testosterone, the male hormone, is also positively related to portfolio turnover, which is consistent with androgen-driven behaviors. Overall, the results show that the endocrine system plays a significant role during financial decision-making, which has important consequences for the financial industry. Journal: Journal of Behavioral Finance Pages: 338-349 Issue: 3 Volume: 22 Year: 2021 Month: 7 X-DOI: 10.1080/15427560.2020.1775600 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1775600 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:3:p:338-349 Template-Type: ReDIF-Article 1.0 Author-Name: David Y. Aharon Author-X-Name-First: David Y. Author-X-Name-Last: Aharon Title: Uncertainty, Fear and Herding Behavior: Evidence from Size-Ranked Portfolios Abstract: This study is aimed at testing the relationship between investors’ uncertainty reflected by market sentiment and herding behavior phenomenon. Using data for 1990–2019 for size-ranked portfolios, the evidence documented here indicates that herding is strongly related to market sentiment as captured by the CBOE’s Volatility Index, the VIX. The results indicate that the VIX, which is also recognized as the fear index, has a substantial impact on herding across all groups and subgroups of size-ranked portfolios. Overall, the effect of VIX exists in most of the quantiles of the cross-sectional absolute deviation distribution. In this context, the scale and magnitude of the fear index impact rises toward the highest parts of the herding distribution. We also show that herding behavior is more pronounced when the market is overwhelmed by sentiment. The findings have several practical implications for investment professionals such as portfolio managers, investment officers, analysts, and other market participants. They also provide academic insights for researchers dealing with market efficiency and investors’ behavior. Journal: Journal of Behavioral Finance Pages: 320-337 Issue: 3 Volume: 22 Year: 2021 Month: 7 X-DOI: 10.1080/15427560.2020.1774887 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1774887 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:3:p:320-337 Template-Type: ReDIF-Article 1.0 Author-Name: Wenti Du Author-X-Name-First: Wenti Author-X-Name-Last: Du Title: News and Market Efficiency in the Japanese Stock Market Abstract: Economists have debated whether market reactions to news depart from the predictions of the efficient market hypothesis (EMH). This article uses the sentiment index and the surprise index from the Thomson Reuters MarketPsych Indices and an ARCH model to investigate the reactions of the return of the Nikkei 225 closing price to different types of news between January 5, 1998 and December 29, 2017, and whether those responses are consistent with the predictions of the EMH. Three sub-periods during the full sample are identified, and the market reactions to the news are then examined and compared among the sub-periods. Journal: Journal of Behavioral Finance Pages: 306-319 Issue: 3 Volume: 22 Year: 2021 Month: 7 X-DOI: 10.1080/15427560.2020.1774886 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1774886 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:3:p:306-319 Template-Type: ReDIF-Article 1.0 Author-Name: Marian W. Moszoro Author-X-Name-First: Marian W. Author-X-Name-Last: Moszoro Title: Political Cognitive Biases Effects on Fund Managers’ Performance Abstract: Does political affiliation matter for stock-market investing? Rare events can produce polarized narratives that potentiate cognitive dissonance on a spectrum of agents. Using a comprehensive dataset of equity hedge funds’ performance and managers’ political affiliation matched by their partisan contributions, I document higher returns of funds managed by Democrats for ten subsequent months—from December 2008 to September 2009—when the interpretation of the US central bank policy was politically polarized and conducive to cognitive dissonance. This result is robust to a set of falsification tests and randomized quasi-experiments. Journal: Journal of Behavioral Finance Pages: 235-253 Issue: 3 Volume: 22 Year: 2021 Month: 7 X-DOI: 10.1080/15427560.2020.1772259 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1772259 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:3:p:235-253 Template-Type: ReDIF-Article 1.0 Author-Name: Cécile Carpentier Author-X-Name-First: Cécile Author-X-Name-Last: Carpentier Author-Name: Jean-Marc Suret Author-X-Name-First: Jean-Marc Author-X-Name-Last: Suret Title: On the Rationality of Institutional Investors: The Case of Major Industrial Accidents Abstract: To determine if institutional investors act more rationally than individual investors, we examine the stock market price drop following 173 major industrial accidents from 1959 to 2017. In most cases, this drop, generally considered excessive, rapidly reverses. Using meta-analysis techniques, we distinguish events likely to trigger a large negative mid-term market reaction (potentially destructive events) from other events. For firms with large institutional holdings, we show that the market drop following potentially destructive events (potentially nondestructive events) is significantly larger (smaller). This is consistent with the hypothesis that investors’ potential irrational reaction depends on their sophistication. Journal: Journal of Behavioral Finance Pages: 289-305 Issue: 3 Volume: 22 Year: 2021 Month: 7 X-DOI: 10.1080/15427560.2020.1774593 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1774593 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:3:p:289-305 Template-Type: ReDIF-Article 1.0 Author-Name: Ray R. Sturm Author-X-Name-First: Ray R. Author-X-Name-Last: Sturm Title: The Influence of Daily Price Extremes on Short-Term Stock Returns Abstract: This paper explores whether investors use daily price extremes as reference points for short-term investing decisions by examining their relation with returns. Excess momentum returns are observed for days in which prices open outside of the previous day’s highest or lowest trading price. This relation is robust to market direction and is consistent over time. Contrary to the disposition effect, the evidence also shows that an additional momentum effect is present when the markets have been closed for two days and open lower than the previous trading day’s low, but a lesser (although significant) effect is documented for openings’ higher than the previous high. Journal: Journal of Behavioral Finance Pages: 254-264 Issue: 3 Volume: 22 Year: 2021 Month: 7 X-DOI: 10.1080/15427560.2020.1772262 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1772262 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:3:p:254-264 Template-Type: ReDIF-Article 1.0 Author-Name: Zhen Cao Author-X-Name-First: Zhen Author-X-Name-Last: Cao Author-Name: Osman Kilic Author-X-Name-First: Osman Author-X-Name-Last: Kilic Author-Name: Xuewu (Wesley) Wang Author-X-Name-First: Xuewu (Wesley) Author-X-Name-Last: Wang Title: Investor Attention, Divergence of Opinions, and Stock Returns Abstract: Using a direct measure of investor attention generated from the Securities and Exchange Commission’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) log files, the authors revisit the stock return predictability of the divergence of opinions in the presence of varying degree of investor attention and information acquisition. They document a positive relationship between the divergence of opinions and future stock returns, consistent with the risk hypothesis, as opposed to the overvaluation hypothesis. More importantly, the authors find that the predictive power of divergence of opinions is more pronounced in stocks with lower investor attention. They further document the construction and profitability of divergence of opinions portfolios augmented with investor attention. A portfolio that goes long on stocks with low investor attention and the highest divergence of opinions and short on stocks with low attention and the lowest divergence of opinions generates a Fama-French 5-factor monthly alpha of 1.14%. Journal: Journal of Behavioral Finance Pages: 265-279 Issue: 3 Volume: 22 Year: 2021 Month: 7 X-DOI: 10.1080/15427560.2020.1772263 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1772263 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:3:p:265-279 Template-Type: ReDIF-Article 1.0 Author-Name: Cary Deck Author-X-Name-First: Cary Author-X-Name-Last: Deck Author-Name: Li Hao Author-X-Name-First: Li Author-X-Name-Last: Hao Author-Name: Weineng Xu Author-X-Name-First: Weineng Author-X-Name-Last: Xu Author-Name: Timothy J. Yeager Author-X-Name-First: Timothy J. Author-X-Name-Last: Yeager Title: Social Comparison and Wealth Inequality in a Leveraged Asset Market Abstract: We hypothesize that upward social comparison of asset holdings among traders exacerbates leveraged asset bubbles because traders shift their frame of reference from profit maximization toward quantity maximization, increasing price momentum. In addition, asset prices should inflate even more in markets with wealth inequality because the relative reference shift becomes stronger. We test this theory within the standard asset market experiment environment, where we introduce the ability to borrow using leverage and treatments encouraging social comparison and manipulation of wealth inequality. We find that social comparison leads to asset overpricing, and its impact is the greatest when combined with wealth inequality. On the other hand, wealth inequality alone does not lead to greater asset price bubbles. These findings are consistent with housing market patterns prior to the financial crisis. Journal: Journal of Behavioral Finance Pages: 382-402 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1786092 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1786092 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:382-402 Template-Type: ReDIF-Article 1.0 Author-Name: Jaeheon Chun Author-X-Name-First: Jaeheon Author-X-Name-Last: Chun Author-Name: Jaejoon Ahn Author-X-Name-First: Jaejoon Author-X-Name-Last: Ahn Author-Name: Youngmin Kim Author-X-Name-First: Youngmin Author-X-Name-Last: Kim Author-Name: Sukjun Lee Author-X-Name-First: Sukjun Author-X-Name-Last: Lee Title: Using Deep Learning to Develop a Stock Price Prediction Model Based on Individual Investor Emotions Abstract: The general purpose of stock price prediction is to help stock analysts design a strategy to increase stock returns. We present the conceptual framework of an emotion-based stock prediction system (ESPS) focused on considering the multidimensional emotions of individual investors. To implement and evaluate the proposed ESPS, emotion indicators (EIs) are generated using emotion term frequency–inverse emotion document frequency (etf−iedf), which modifies term frequency–inverse document frequency (tf−idf). Stock price is predicted using a deep neural network (DNN). To compare the performance of the ESPS, sentiment analysis and a naïve method are employed. The prediction accuracy of the experiments using EIs was the highest at 95.24%, 96.67%, 94.44%, and 95.31% for each training period. The accuracy of prediction using EIs was better than the accuracy of prediction using other methods. Journal: Journal of Behavioral Finance Pages: 480-489 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1821686 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1821686 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:480-489 Template-Type: ReDIF-Article 1.0 Author-Name: Pedro Manuel Nogueira Reis Author-X-Name-First: Pedro Manuel Nogueira Author-X-Name-Last: Reis Author-Name: Carlos Pinho Author-X-Name-First: Carlos Author-X-Name-Last: Pinho Title: A Reappraisal of the Causal Relationship between Sentiment Proxies and Stock Returns Abstract: This article investigates the suitability of 13 investor sentiment proxies as causal explanations for monthly stock returns of the European S&P 350 constituents over 45 years. We analyzed a sample of 362 companies covering 16 European countries. Analyses incorporate multiple categories of investor sentiment arising from market or survey data, as well as technical analysis, risk measures, company fundamentals and macroeconomic variables. In addition, we provide an extended review of sentiment proxy measures based on market data. This work applied general model of moments (GMM) to dynamic panel data to estimate short-run and long-run influences along with Granger causality. Our findings demonstrate the role of several investor sentiment measures in predicting stock returns even after controlling for variables such as fundamentals, macroeconomic, market and technical analysis. Together, sentiment measures of implied volatility in stock options, such as VIX and VSTOXX, put and call ratios, gold, government bond yield spreads, mispricing along with economic and confidence sentiment indicators can significantly predict how irrational behaviors of investors can determine stock returns. Co-movements between markets provide further evidence of contagion. Considering the unobservable nature of sentiment, we provide a set of sentiment proxies, and reveal new measures such as gold, government yields spread and a mispricing ratio, that serve to predict European market returns. Furthermore, to our knowledge this study is one of the few studies to apply time dynamic panel data estimation to a large set of sentiment proxies and a set of complete control variables in a long-term framework. Journal: Journal of Behavioral Finance Pages: 420-442 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1792910 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1792910 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:420-442 Template-Type: ReDIF-Article 1.0 Author-Name: Doron Sonsino Author-X-Name-First: Doron Author-X-Name-Last: Sonsino Author-Name: Yaron Lahav Author-X-Name-First: Yaron Author-X-Name-Last: Lahav Author-Name: Amir Levkowitz Author-X-Name-First: Amir Author-X-Name-Last: Levkowitz Title: The Conflicting Links between Forecast-Confidence and Trading Propensity Abstract: While finance studies suggest that forecast-confidence motivates trading, the experimental findings regarding the confidence-trading links are inconclusive and statistically weak. Attempting to bridge the gap, we modify the standard interval forecasting task to measure forecast-confidence more directly. The adapted task is utilized to test the confidence-trading correlations at the attitudinal level and in specific scenarios. The attitudinal test surprisingly reveals that forecast-confidence negatively correlates with the inclination to churn one’s stock portfolio, although confidence in profitability indeed boosts the willingness to trade particular stocks. The attitudinal correlation is endogenous, brought by opposite personality and competence effects on confidence and trading. Journal: Journal of Behavioral Finance Pages: 443-460 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1792911 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1792911 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:443-460 Template-Type: ReDIF-Article 1.0 Author-Name: Mehmet Balcilar Author-X-Name-First: Mehmet Author-X-Name-Last: Balcilar Author-Name: Elie Bouri Author-X-Name-First: Elie Author-X-Name-Last: Bouri Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Name: Clement Kweku Kyei Author-X-Name-First: Clement Kweku Author-X-Name-Last: Kyei Title: High-Frequency Predictability of Housing Market Movements of the United States: The Role of Economic Sentiment Abstract: We analyze the ability of a newspaper-based economic sentiment index of the United States to predict housing market movements using daily data from 2nd August, 2007 to 19th June, 2020. For this purpose, we use a nonparametric causality-in-quantiles test, which allows us to test for predictability over the entire conditional distribution of not only housing returns, but also volatility, by controlling for misspecification due to nonlinearity and structural breaks. Our results show that economic sentiment does predict housing returns (unlike the conditional mean-based Granger causality test) and volatility, barring the extreme upper ends of the respective conditional distributions. Journal: Journal of Behavioral Finance Pages: 490-498 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1822359 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1822359 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:490-498 Template-Type: ReDIF-Article 1.0 Author-Name: Michael J. Wynes Author-X-Name-First: Michael J. Author-X-Name-Last: Wynes Title: Anger, Fear, and Investor’s Information Search Behavior Abstract: This study investigates the differential effect of anger and fear on investors information search behavior. Based on theories from psychology, I predict that angry investors will seek out less additional information and exert a lower depth of thought than fearful investors after a negative earnings surprise. Additionally, I predict that these differences will be moderated in investors that exhibit higher levels of emotion management ability. Using an experiment, I find that neither anger nor fear had any effect on the number of additional information sources investors access. However, angry investors processed information less deeply than fearful investors. This is evident by significant differences in the amount of time spent reading additional information and the ability to recall details about the information. Finally, high emotion management ability reduces differences in depth of thought for both angry and fearful investors. The results of this study have implications for investors and researchers. Journal: Journal of Behavioral Finance Pages: 403-419 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1786386 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1786386 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:403-419 Template-Type: ReDIF-Article 1.0 Author-Name: Roman Frydman Author-X-Name-First: Roman Author-X-Name-Last: Frydman Author-Name: Nicholas Mangee Author-X-Name-First: Nicholas Author-X-Name-Last: Mangee Author-Name: Josh Stillwagon Author-X-Name-First: Josh Author-X-Name-Last: Stillwagon Title: How Market Sentiment Drives Forecasts of Stock Returns Abstract: We reveal a novel channel through which market participants’ sentiment influences how they forecast stock returns: their optimism (pessimism) affects the weights they assign to fundamentals. Our analysis yields four main findings. First, if good (bad) “news” about dividends and interest rates coincides with participants’ optimism (pessimism), the news about these fundamentals has a significant effect on participants’ forecasts of future returns and has the expected signs (positive for dividends and negative for interest rates). Second, in models without interactions, or when market sentiment is neutral or conflicts with news about dividends and/or interest rates, this news often does not have a significant effect on ex ante or ex post returns. Third, market sentiment is largely unrelated to the state of economic activity, indicating that it is driven by non-fundamental considerations. Moreover, market sentiment influences stock returns highly irregularly, in terms of both timing and magnitude. This finding supports recent theoretical approaches recognizing that economists and market participants alike face Knightian uncertainty about the correct model driving stock returns. Journal: Journal of Behavioral Finance Pages: 351-367 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1774769 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1774769 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:351-367 Template-Type: ReDIF-Article 1.0 Author-Name: Dan Yang Author-X-Name-First: Dan Author-X-Name-Last: Yang Author-Name: Tingyu Ma Author-X-Name-First: Tingyu Author-X-Name-Last: Ma Author-Name: Yuetang Wang Author-X-Name-First: Yuetang Author-X-Name-Last: Wang Author-Name: Guojun Wang Author-X-Name-First: Guojun Author-X-Name-Last: Wang Title: Does Investor Attention Affect Stock Trading and Returns? Evidence from Publicly Listed Firms in China Abstract: Limited attention is an inevitable outcome of voluminous information. Investors facing a large number of stocks can only focus on a few and endeavor to have access to in-depth knowledge. Since the retrieved knowledge would affect investors’ decisions, investor attention becomes a factor in affecting stock returns and trading volumes. Through using 890,840 firm-week observations of Chinese listed firms between 2011 and 2018 as a sample, we document that investor attention, measured by abnormal Baidu search volume index (ASVI), is positively associated with contemporaneous stock returns but with a complete reversal in the subsequent period; and ASVI exhibits a positive link with trading volumes without a subsequent reversal, but its predictable ability becomes weaker in subsequent weeks. The effect of ASVI is pronounced for the ChiNext market and firms with higher level of financial transparency. We further find investor attention has been driven by five corporate events including earnings announcements, management forecasts, financial analysts following, mergers and acquisitions and dividend payout. This paper contributes to the theory of limited attention through using a direct measure of attention, providing evidence on its economic consequences in the Chinese stock market and exploring specific events that drive investor attention. Journal: Journal of Behavioral Finance Pages: 368-381 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1785469 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1785469 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:368-381 Template-Type: ReDIF-Article 1.0 Author-Name: Matthias W. Uhl Author-X-Name-First: Matthias W. Author-X-Name-Last: Uhl Author-Name: Milos Novacek Author-X-Name-First: Milos Author-X-Name-Last: Novacek Title: When it Pays to Ignore: Focusing on Top News and their Sentiment Abstract: Relying on over 300 million news sentiment scores from a global news source covering a battery of different news topics and their sentiment, we construct a novel measure called top news sentiment based on rolling correlations with equity returns. We find an effect of top news sentiment on stock returns with robust timeframes. These findings add to the sentiment literature with the first dynamically created sentiment variable. We are able to construct profitable trading strategies based on top news sentiment. It therefore pays off for investors to be inattentive to most news topics and their sentiment. Journal: Journal of Behavioral Finance Pages: 461-479 Issue: 4 Volume: 22 Year: 2021 Month: 10 X-DOI: 10.1080/15427560.2020.1821375 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1821375 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:22:y:2021:i:4:p:461-479 Template-Type: ReDIF-Article 1.0 Author-Name: Leon Li Author-X-Name-First: Leon Author-X-Name-Last: Li Author-Name: Peter Miu Author-X-Name-First: Peter Author-X-Name-Last: Miu Title: Behavioral Heterogeneity in the Stock Market Revisited: What Factors Drive Investors as Fundamentalists or Chartists? Abstract: This paper reexamines the issue of behavioral heterogeneity in the stock market. In contrast to previously documented contemporaneous results, we test the issue by identifying and testing four new determinants of the proportion of fundamentalists and chartists in the stock market. Our empirical results are consistent with the following notions. First, the proportion of fundamentalists increases for stocks with incremental information involved in accounting reporting as proxied by discretionary accruals. Second, the proportion of fundamentalists is positively related to the degree of dispersion in financial analysts' forecasts, which implies that stock investors care more about the intrinsic value of firms obtained with fundamental analysis when encountering information asymmetry or uncertainty. Third, the proportion of fundamentalists increases for stocks with higher volatility in prices. For the proportion of chartists, the reverse of these arguments holds true. Fourth, the proportion of chartists versus fundamentalists is related to the investment horizon. Investors give more weights to technical analysis when considering short-term investments. For long-term investments, investors increase the weighting given to the fundamental analysis. Journal: Journal of Behavioral Finance Pages: 73-91 Issue: 1 Volume: 23 Year: 2022 Month: 1 X-DOI: 10.1080/15427560.2020.1841767 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1841767 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:1:p:73-91 Template-Type: ReDIF-Article 1.0 Author-Name: Mouna Youssef Author-X-Name-First: Mouna Author-X-Name-Last: Youssef Title: Do Oil Prices and Financial Indicators Drive the Herding Behavior in Commodity Markets? Abstract: This study tests the presence of herding behavior in commodity markets (energy, industrial metals, precious metals, grains food, and livestock) from a constant and time-varying perspective. Additionally, we investigate whether oil prices and major financial indicators drive herding in these markets. Using daily data over the period 2003–2017, the constant model based on the cross-sectional absolute deviation model suggests no herding in any of the commodity sectors. However, using a time-varying approach, results reveal the existence of herding in almost all sectors, mainly during and after the global financial crisis. Furthermore, the oil price contributes significantly to herding among investors in the energy sector. We also find that the major exchange rate contributes to herding only for industrial metals sectors during a very limited period. Moreover, the US stock market also has a limited contribution to herding in the energy and the industrial metals sectors. Journal: Journal of Behavioral Finance Pages: 58-72 Issue: 1 Volume: 23 Year: 2022 Month: 1 X-DOI: 10.1080/15427560.2020.1841193 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1841193 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:1:p:58-72 Template-Type: ReDIF-Article 1.0 Author-Name: Gerson de Souza Raimundo Júnior Author-X-Name-First: Gerson de Souza Author-X-Name-Last: Raimundo Júnior Author-Name: Rafael Baptista Palazzi Author-X-Name-First: Rafael Baptista Author-X-Name-Last: Palazzi Author-Name: Ricardo de Souza Tavares Author-X-Name-First: Ricardo de Souza Author-X-Name-Last: Tavares Author-Name: Marcelo Cabus Klotzle Author-X-Name-First: Marcelo Cabus Author-X-Name-Last: Klotzle Title: Market Stress and Herding: A New Approach to the Cryptocurrency Market Abstract: Herding is a feature of investor behavior in financial markets, particularly in market stress. We apply an approach based on the cross-sectional dispersion of individual stocks' betas, which allows us to extract herding patterns, using two dynamic methodologies to measure the herding phenomenon over time with a state-space model for the Cryptocurrency Market. The results reveal that herding toward the market shows significant movement, and persistence regardless of the market condition, expressed through the market index, market volatility, and the volatility index. When analyzing path herding is possible to observe that herding was intense during the investigated period. We also identify a positive relationship between herding and market stress. Journal: Journal of Behavioral Finance Pages: 43-57 Issue: 1 Volume: 23 Year: 2022 Month: 1 X-DOI: 10.1080/15427560.2020.1821688 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1821688 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:1:p:43-57 Template-Type: ReDIF-Article 1.0 Author-Name: Haili Wu Author-X-Name-First: Haili Author-X-Name-Last: Wu Title: Intuition in Investment Decision-Making Across Cultures Abstract: Interest in the phenomenon of intuition in the fields of business and management has grown rapidly in recent years. However, whilst this subject has seen significant theoretical advances, empirical work in this area has tended to lag behind. Even fewer studies have examined intuition from a cultural and cross-cultural perspective. I studied the phenomenon of intuitive decision-making in the asset management sector through the use of in-depth semi-structured interviews (N = 42) and self-reported cognitive tests (N = 30) on a population of 72 experienced professional fund managers from both China and the West. The present research found that Chinese and Western fund managers were not significantly different in their preference for an intuitive cognitive thinking style. However, Chinese fund managers were more likely than Western fund managers to use intuition in their investment decision-making. It is thus concluded that the use of intuition is different from intuitive predisposition. In other words, individuals may have a dominant or preferred cognitive thinking style, whereas their decision-making behavior is influenced by the demands of the situation or task. Based on these findings, I update the typology of intuitive and contextual "signalling”, created by [Hensman, A., and E. Sadler-Smith. 2011. “Intuitive Decision Making in Banking and Finance.” European Management Journal 29 (1):51–66]. The updated typology provides a basis for practical recommendations and offers potential directions for future inquiries into this vital aspect of investment cognition and decision-making behavior. Journal: Journal of Behavioral Finance Pages: 106-122 Issue: 1 Volume: 23 Year: 2022 Month: 1 X-DOI: 10.1080/15427560.2020.1848839 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1848839 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:1:p:106-122 Template-Type: ReDIF-Article 1.0 Author-Name: Mohammad Tayeh Author-X-Name-First: Mohammad Author-X-Name-Last: Tayeh Author-Name: Vasileios Kallinterakis Author-X-Name-First: Vasileios Author-X-Name-Last: Kallinterakis Title: Feedback Trading in Currency Markets: International Evidence Abstract: We investigate the presence of feedback trading in 66 currencies for the 2001–2018 period and find that feedback traders are active in many of them, giving rise mostly to positive feedback trading, when present. This suggests that feedback traders assume a stabilizing role, buying when currencies depreciate and selling when they appreciate, with depreciations found to boost positive feedback trading more strongly than appreciations. Feedback trading is found to exhibit long memory for most currencies, while no discernible feedback trading patterns surface within-versus-outside the recent global financial crisis. Journal: Journal of Behavioral Finance Pages: 1-22 Issue: 1 Volume: 23 Year: 2022 Month: 1 X-DOI: 10.1080/15427560.2020.1821685 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1821685 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:1:p:1-22 Template-Type: ReDIF-Article 1.0 Author-Name: Steven D. Silver Author-X-Name-First: Steven D. Author-X-Name-Last: Silver Author-Name: Marko Raseta Author-X-Name-First: Marko Author-X-Name-Last: Raseta Author-Name: Alina Bazarova Author-X-Name-First: Alina Author-X-Name-Last: Bazarova Title: Dynamics of Phase Transitions in Expectations for Financial Markets: An Agent-Based, Multicomponent Model Abstract: We elaborate on behavioral foundations for agent expectations in financial markets and propose a multicomponent model. Components in bounded rational processing and imitative processing that can underlie frequently cited “herding” in financial markets are proposed in the agent-based model. We define a transition function for the dominance of a component in the distance between market price and price metrics based on fundamental value. The multicomponent model is then implemented in a network model of interacting agents. Our numerical exercises with the proposed model demonstrate the extensively cited property of phase transitions between ordered and disordered states that are commonly observed to presage critical points in financial markets is demonstrated. Additional numerical exercises examine the strength of neighbor connectivity in the component that generates “herding” as it relates to cycle in financial markets. Finally, we consider a methodology to operationalize the strength of neighbor connectivity as a policy variable for managing levels of this variable toward efficient markets. Journal: Journal of Behavioral Finance Pages: 92-105 Issue: 1 Volume: 23 Year: 2022 Month: 1 X-DOI: 10.1080/15427560.2020.1848838 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1848838 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:1:p:92-105 Template-Type: ReDIF-Article 1.0 Author-Name: Marc J. R. Broekema Author-X-Name-First: Marc J. R. Author-X-Name-Last: Broekema Author-Name: Niek Strohmaier Author-X-Name-First: Niek Author-X-Name-Last: Strohmaier Author-Name: Jan A. A. Adriaanse Author-X-Name-First: Jan A. A. Author-X-Name-Last: Adriaanse Author-Name: Jean-Pierre I. van der Rest Author-X-Name-First: Jean-Pierre I. Author-X-Name-Last: van der Rest Title: Are Business Valuators Biased? A Psychological Perspective on the Causes of Valuation Disputes Abstract: Business valuations of the same company made by different valuators frequently diverge, resulting in lengthy and costly disputes. This paper takes a novel approach in explaining inconsistencies in business valuations by adopting a psychological perspective and offering a first investigation into the role of cognitive biases in valuations. In two experimental studies (N = 331) we show that valuators can be affected by both anchoring bias and engagement bias (i.e., being affected by a client’s interests). These findings cast doubt on the notion of fair value and demonstrate the importance of recognizing the psychology of business valuations. Our contribution is timely considering the current COVID-19 pandemic and its aftermath in which accurate valuations will be paramount, but also extremely complex due to the high degree of uncertainty in the economy and underlying industries. Journal: Journal of Behavioral Finance Pages: 23-42 Issue: 1 Volume: 23 Year: 2022 Month: 1 X-DOI: 10.1080/15427560.2020.1821687 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1821687 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:1:p:23-42 Template-Type: ReDIF-Article 1.0 Author-Name: Ken H. Guo Author-X-Name-First: Ken H. Author-X-Name-Last: Guo Author-Name: Xiaoxiao Yu Author-X-Name-First: Xiaoxiao Author-X-Name-Last: Yu Title: Retail Investors Use XBRL Structured Data? Evidence from the SEC’s Server Log Abstract: XBRL (eXtensible Business Reporting Language) has been touted as a new technology that may someday replace HTML (Hypertext Markup Language) as the standard method of statutory filings. This study offers some initial empirical evidence suggesting that retail investors do not use XBRL structured data as much as expected by the SEC (the U.S. Securities and Exchange Commission). The result shows that the main reports in HTML format of 10-K filings are used much more frequently than the structured data in raw XBRL and the Microsoft Excel format. In addition, textual reports derived from XBRL data are also used more frequently than the two structured data formats. Taken together, the results suggest that the XBRL mandate pushed by the SEC may need a second look. Journal: Journal of Behavioral Finance Pages: 166-174 Issue: 2 Volume: 23 Year: 2022 Month: 5 X-DOI: 10.1080/15427560.2020.1864736 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1864736 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:2:p:166-174 Template-Type: ReDIF-Article 1.0 Author-Name: Suresh Kumar Oad Rajput Author-X-Name-First: Suresh Kumar Author-X-Name-Last: Oad Rajput Author-Name: Ishfaque Ahmed Soomro Author-X-Name-First: Ishfaque Ahmed Author-X-Name-Last: Soomro Author-Name: Najma Ali Soomro Author-X-Name-First: Najma Ali Author-X-Name-Last: Soomro Title: Bitcoin Sentiment Index, Bitcoin Performance and US Dollar Exchange Rate Abstract: This study introduces a comprehensive Google search volume based Bitcoin Sentiment Index (BSI) and investigates its symmetric and asymmetric association with Bitcoin's returns, volume, and volatility, and with United States Dollar (USD) exchange rates. Our results indicate a positive association of BSI with Bitcoin's returns and volume, but a negative relationship with its return volatility. Besides, Bitcoin's optimistic sentiments have an asymmetric relationship with the USD exchange rate in the short-run, and the Bitcoin price has an asymmetric and negative association with USD in the short-run and long-run. We also found a 35.47% speed of adjustment to long-run equilibrium. Journal: Journal of Behavioral Finance Pages: 150-165 Issue: 2 Volume: 23 Year: 2022 Month: 5 X-DOI: 10.1080/15427560.2020.1864735 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1864735 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:2:p:150-165 Template-Type: ReDIF-Article 1.0 Author-Name: Mouna Youssef Author-X-Name-First: Mouna Author-X-Name-Last: Youssef Title: What Drives Herding Behavior in the Cryptocurrency Market? Abstract: This paper uses the cross-sectional absolute deviation (CSAD) in static and time-varying versions to examine herding in the cryptocurrency market from April 2013 to November 2019. Results from the static model confirm the evidence of an anti-herding behavior over the considered period. However, the time-varying analysis suggests the presence of herding behavior around the end of 2013 and persists until the end of the sample period. Furthermore, by examining the factors relating to market microstructure and general economic conditions that can drive herding, we find that the level of herding in the cryptocurrency market rises as volatility, the S&P500, and the dollar index increase. However, the rise in the trading volume, gold price, and the economic policy uncertainty index (EPU) reduce the herding in the cryptocurrency market. Journal: Journal of Behavioral Finance Pages: 230-239 Issue: 2 Volume: 23 Year: 2022 Month: 5 X-DOI: 10.1080/15427560.2020.1867142 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1867142 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:2:p:230-239 Template-Type: ReDIF-Article 1.0 Author-Name: Yuk Ying (Candie) Chang Author-X-Name-First: Yuk Ying (Candie) Author-X-Name-Last: Chang Author-Name: Wei Hao Author-X-Name-First: Wei Author-X-Name-Last: Hao Title: Negativity Bias of Analyst Forecasts Abstract: In contrast to the conventional view that analysts forecast optimistically, we provide evidence of the Negativity Bias. Analysts show negative forecast bias associated with their relative local income growth, whether the growth is positive or negative. The bias is stronger for negative growth than for positive growth. The negative bias also directly affects the bias of the next analysts of the same and peer earnings being forecast. Our results suggest non-fundamental factors at work. Journal: Journal of Behavioral Finance Pages: 175-188 Issue: 2 Volume: 23 Year: 2022 Month: 5 X-DOI: 10.1080/15427560.2020.1865353 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1865353 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:2:p:175-188 Template-Type: ReDIF-Article 1.0 Author-Name: Svatopluk Kapounek Author-X-Name-First: Svatopluk Author-X-Name-Last: Kapounek Author-Name: Zuzana Kučerová Author-X-Name-First: Zuzana Author-X-Name-Last: Kučerová Author-Name: Evžen Kočenda Author-X-Name-First: Evžen Author-X-Name-Last: Kočenda Title: Selective Attention in Exchange Rate Forecasting Abstract: We analyze the exchange rate forecasting performance under the assumption of selective attention. Although currency markets react to a variety of different information, we hypothesize that market participants process only a limited amount of information. Our analysis includes more than 100,000 news articles relevant to the six most-traded foreign exchange currency pairs for the period of 1979–2016. We employ a dynamic model averaging approach to reduce model selection uncertainty and to identify time-varying probability to include regressors in our models. Our results show that smaller sizes models accounting for the presence of selective attention offer improved fitting and forecasting results. Specifically, we document a growing impact of foreign trade and monetary policy news on the euro/dollar exchange rate following the global financial crisis. Overall, our results point to the existence of selective attention in the case of most currency pairs. Journal: Journal of Behavioral Finance Pages: 210-229 Issue: 2 Volume: 23 Year: 2022 Month: 5 X-DOI: 10.1080/15427560.2020.1865355 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1865355 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:2:p:210-229 Template-Type: ReDIF-Article 1.0 Author-Name: Huajing Hu Author-X-Name-First: Huajing Author-X-Name-Last: Hu Author-Name: Katarzyna Platt Author-X-Name-First: Katarzyna Author-X-Name-Last: Platt Author-Name: Chih-Huei (Debby) Su Author-X-Name-First: Chih-Huei (Debby) Author-X-Name-Last: Su Title: Strategic Announcement Sequencing: Earnings and M&A Announcements Abstract: The authors examine whether acquiring companies strategically time their quarterly earnings and merger and acquisition announcements. Acquiring companies have the ability and incentive to alter the sequence of these 2 types of announcements to optimize the market’s perception of the firm. The authors show that acquiring companies are more likely to announce earnings before mergers and acquisitions if their earnings meet analyst expectations, especially if the acquiring company plans to use stock as a full or partial method of payment. Additionally, the authors find that companies that announce favorable earnings profiles create a more positive news environment and generate higher abnormal returns for their subsequently announced acquisitions. Journal: Journal of Behavioral Finance Pages: 132-149 Issue: 2 Volume: 23 Year: 2022 Month: 5 X-DOI: 10.1080/15427560.2020.1864734 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1864734 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:2:p:132-149 Template-Type: ReDIF-Article 1.0 Author-Name: Hardik A. Marfatia Author-X-Name-First: Hardik A. Author-X-Name-Last: Marfatia Author-Name: Christophe André Author-X-Name-First: Christophe Author-X-Name-Last: André Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Title: Predicting Housing Market Sentiment: The Role of Financial, Macroeconomic and Real Estate Uncertainties Abstract: Sentiment indicators have long been closely monitored by economic forecasters, notably to predict short-term moves in consumption and investment. Recently, housing sentiment indices have been developed to forecast housing market developments. Sentiment indices partly reflect economic determinants, but also more subjective factors, thereby adding information, particularly in periods of uncertainty, when economic relations are less stable than usual. While many studies have investigated the relevance of sentiment indicators for forecasting, few have looked at the factors which shape sentiment. In this paper, we investigate the role of different types of uncertainty in predicting housing sentiment, controlling for a wide set of economic and financial factors. We use a dynamic model averaging/selection (DMA/DMS) approach to assess the relevance of uncertainty and other factors in forecasting housing sentiment at different points in time. We find that housing sentiment forecast errors from models incorporating uncertainty measures are up to 40% lower at a two-year horizon, compared with models ignoring uncertainty. We also show, by examining DMS posterior inclusion probabilities, that uncertainty has become more relevant since the 2008 global financial crisis, especially at longer forecast horizons. Journal: Journal of Behavioral Finance Pages: 189-209 Issue: 2 Volume: 23 Year: 2022 Month: 5 X-DOI: 10.1080/15427560.2020.1865354 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1865354 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:2:p:189-209 Template-Type: ReDIF-Article 1.0 Author-Name: Wolfgang Kuhle Author-X-Name-First: Wolfgang Author-X-Name-Last: Kuhle Title: Thought Viruses and Asset Prices Abstract: We develop a tractable model in which asset prices are driven by the epidemic spread of certain investment ideas. Once an idea “goes viral,” equilibrium prices exhibit a pattern of boom and bust. In turn, we identify a timeline of symptoms, which indicate whether a boom is in its early or later stages. Moreover, we find that prices start to decline while the number of infected agents, who buy the asset, is still rising. The presence of rational agents, who correctly anticipate the cycle, accelerates booms, lowers peak prices and tends to produce broad, drawn-out, market tops. Journal: Journal of Behavioral Finance Pages: 123-131 Issue: 2 Volume: 23 Year: 2022 Month: 5 X-DOI: 10.1080/15427560.2020.1848840 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1848840 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:2:p:123-131 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1867143_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220804T044749 git hash: 24b08f8188 Author-Name: Benjamin M. Blau Author-X-Name-First: Benjamin M. Author-X-Name-Last: Blau Author-Name: Todd G. Griffith Author-X-Name-First: Todd G. Author-X-Name-Last: Griffith Author-Name: Ryan J. Whitby Author-X-Name-First: Ryan J. Author-X-Name-Last: Whitby Title: Price Clustering, Preferences for Round Prices, and Expected Returns Abstract: Researchers have documented that individuals have a strong penchant for round numbers in a variety of settings, such as trading in financial markets. Beginning as early as the 1930s, empirical research has shown that security prices tend to cluster on round increments. This anomalous finding has persisted over time and in a wide range of different types of securities markets. We examine whether stocks with greater price clustering experience excess demand and consequently, negative return premia. Using a variety of traditional asset pricing tests, we find support for this argument as price clustering is associated with a robust, negative return premium. Our results are robust to transaction-level clustering, cross-sectional regressions, and multi-factor models. Journal: Journal of Behavioral Finance Pages: 301-315 Issue: 3 Volume: 23 Year: 2022 Month: 7 X-DOI: 10.1080/15427560.2020.1867143 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1867143 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:3:p:301-315 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1866573_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220804T044749 git hash: 24b08f8188 Author-Name: Anthony Sanford Author-X-Name-First: Anthony Author-X-Name-Last: Sanford Title: Does Perception Matter in Asset Pricing? Modeling Volatility Jumps Using Twitter-Based Sentiment Indices Abstract: This article uses public perceptions to forecast short-term fluctuations in asset prices. Based on four billion tweets scraped between 2009 and 2019, I perform textual analysis to construct daily sentiment indices. The sentiment indices allow us to forecast stock volatility jumps as well as expected jump levels. The implications of forecasting volatility jumps are substantive. First, volatility jumps have a significant effect on option prices. Second, changes in the volatility path lead to large (negatively related) changes in the prices’ future trajectory. Determining what information causes jumps allows for better risk management and more accurate asset pricing models. Journal: Journal of Behavioral Finance Pages: 262-280 Issue: 3 Volume: 23 Year: 2022 Month: 7 X-DOI: 10.1080/15427560.2020.1866573 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1866573 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:3:p:262-280 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1867141_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220804T044749 git hash: 24b08f8188 Author-Name: Woan-Yuh Jang Author-X-Name-First: Woan-Yuh Author-X-Name-Last: Jang Author-Name: Chun-Ching Ho Author-X-Name-First: Chun-Ching Author-X-Name-Last: Ho Title: The Sobering Up Effect: Why Analysts Become Less Optimistic as the Release of Actual Earnings Gets Closer Abstract: Using companies listed on the Taiwan Stock Exchange and the Taipei Exchange between 2000 and 2017, this study explores whether the sobering-up effect exists in analysts’ earnings forecasts. Further, this study also examined whether the aggregate bias (accuracy) of analysts’ annual earnings forecasts vary with analysts’ familiarity with the forecasted companies and whether analysts’ forecasting behavior is influenced by market sentiment. Our findings provide evidence for the existence of sobering-up effect on analysts’ earnings forecasts. When analysts forecast earnings for companies that they are less familiar with or the market is bearish, the analysts’ strength of sobering is more significant. Journal: Journal of Behavioral Finance Pages: 281-300 Issue: 3 Volume: 23 Year: 2022 Month: 7 X-DOI: 10.1080/15427560.2020.1867141 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1867141 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:3:p:281-300 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1867551_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220804T044749 git hash: 24b08f8188 Author-Name: Ruipeng Liu Author-X-Name-First: Ruipeng Author-X-Name-Last: Liu Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Title: Investors’ Uncertainty and Forecasting Stock Market Volatility Abstract: This article examines whether incorporating investors’ uncertainty, as captured by the conditional volatility of sentiment, can help forecasting volatility of stock markets. In this regard, using the Markov-switching multifractal (MSM) model, we find that investors’ uncertainty can substantially increase the accuracy of the forecasts of stock market volatility according to the forecast encompassing test. We further provide evidence that the MSM outperforms the dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity (DCC-GARCH) model. Journal: Journal of Behavioral Finance Pages: 327-337 Issue: 3 Volume: 23 Year: 2022 Month: 7 X-DOI: 10.1080/15427560.2020.1867551 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1867551 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:3:p:327-337 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1865963_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220804T044749 git hash: 24b08f8188 Author-Name: Petre Caraiani Author-X-Name-First: Petre Author-X-Name-Last: Caraiani Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Name: Chi Keung Marco Lau Author-X-Name-First: Chi Keung Marco Author-X-Name-Last: Lau Author-Name: Hardik A. Marfatia Author-X-Name-First: Hardik A. Author-X-Name-Last: Marfatia Title: Effects of Conventional and Unconventional Monetary Policy Shocks on Housing Prices in the United States: The Role of Sentiment Abstract: In this paper, we use a Quantile Structural Vector Autoregressive (QSVAR) model, estimated over the quarterly period of 1975:Q3 to 2017:Q3, to analyze whether the impact of monetary policy shocks on growth rate of real house price in the United States is contingent on the initial state of housing market sentiment. We find that contractionary monetary policy reduces growth rate of real house price more strongly when the market is characterized by optimism rather than pessimism, with this effect being more pronounced under unconventional monetary policy decisions. Further robustness checks confirm our results. Our findings highlight the role in sentiments in driving the policy effectiveness and thus, have important implications for policy decisions. Journal: Journal of Behavioral Finance Pages: 241-261 Issue: 3 Volume: 23 Year: 2022 Month: 7 X-DOI: 10.1080/15427560.2020.1865963 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1865963 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:3:p:241-261 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1913159_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220804T044749 git hash: 24b08f8188 Author-Name: Surya Chelikani Author-X-Name-First: Surya Author-X-Name-Last: Chelikani Author-Name: Osman Kilic Author-X-Name-First: Osman Author-X-Name-Last: Kilic Author-Name: Xuewu (Wesley) Wang Author-X-Name-First: Xuewu (Wesley) Author-X-Name-Last: Wang Title: Past Stock Returns and the MAX Effect Abstract: This paper investigates how past stock returns affect investors’ lottery demand. We show that the maximum daily return (MAX) effect, first documented by Bali et al. (Maxing Out: Stocks as Lotteries and the Cross-Section of Expected Returns) is predominantly concentrated among stocks that have worst returns in the recent past. In contrast, for stocks that have recorded best past returns, the MAX effect becomes much weaker or even disappears. Our findings hold in the presence of a variety of control variables including the conventional return predictors, stock mispricing, stock price proximity to its 52-week high, and capital gains overhang. We interpret it as evidence that investors’ lottery demand intensifies in the presence of investment losses, consistent with the notion of time varying and state dependent nature of investors’ lottery preference. We further show that a self-financing portfolio that goes long in stocks with the worst past returns and low MAX and short in stocks with worst past returns and high MAX yields statistically and economically significant abnormal returns after risk adjustment by standard asset pricing models. Journal: Journal of Behavioral Finance Pages: 338-352 Issue: 3 Volume: 23 Year: 2022 Month: 7 X-DOI: 10.1080/15427560.2021.1913159 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1913159 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:3:p:338-352 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1913160_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220804T044749 git hash: 24b08f8188 Author-Name: Anastasios Petropoulos Author-X-Name-First: Anastasios Author-X-Name-Last: Petropoulos Author-Name: Vasileios Siakoulis Author-X-Name-First: Vasileios Author-X-Name-Last: Siakoulis Author-Name: Evangelos Stavroulakis Author-X-Name-First: Evangelos Author-X-Name-Last: Stavroulakis Author-Name: Panagiotis Lazaris Author-X-Name-First: Panagiotis Author-X-Name-Last: Lazaris Author-Name: Nikolaos Vlachogiannakis Author-X-Name-First: Nikolaos Author-X-Name-Last: Vlachogiannakis Title: Employing Google Trends and Deep Learning in Forecasting Financial Market Turbulence Abstract: In this paper we apply text mining methodologies on a set of 10,000 Central Bank speeches to construct a financial dictionary, based on which we use Google Trends indices to measure people’s interest in financial news. Particularly, we investigate the relationship between these indices and financial market turbulence leveraging on Deep Learning techniques, which are benchmarked against a variety of Machine Learning algorithms and traditional statistical techniques. Our main finding is that Google queries convey information able to predict future market turbulence in a short time period (one month), and that Deep Learning algorithms clearly outperform over benchmark techniques. Google Trends can provide useful input in the creation of crisis Early Warning Systems, as social data are more responsive compared to official financial indicators, which are usually available with a lag of several weeks or months. Thus, such an Early Warning System (EWS) that is continuously updated with current social data can be a valuable tool for policymakers, as it can immediately identify signs of whether a crisis is imminent or not. Journal: Journal of Behavioral Finance Pages: 353-365 Issue: 3 Volume: 23 Year: 2022 Month: 7 X-DOI: 10.1080/15427560.2021.1913160 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1913160 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:3:p:353-365 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1867550_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220804T044749 git hash: 24b08f8188 Author-Name: Chang Liu Author-X-Name-First: Chang Author-X-Name-Last: Liu Author-Name: Haiyue Liu Author-X-Name-First: Haiyue Author-X-Name-Last: Liu Author-Name: Xi Chen Author-X-Name-First: Xi Author-X-Name-Last: Chen Author-Name: Yin Zhang Author-X-Name-First: Yin Author-X-Name-Last: Zhang Author-Name: Min Guo Author-X-Name-First: Min Author-X-Name-Last: Guo Title: Dispersed Analysts’ Forecasts of Firms’ Operational Uncertainties and Stock Returns Abstract: A company’s operational uncertainty resulting from economic activity could be measured by its contingent liabilities. When the contingent liabilities are forecasted by the analysts, the dispersed analysts’ forecasts might constitute another source of uncertainty. In this study, the Uncertainty (contingent liabilities) of Uncertainty (dispersed analysts’ forecasts) is measured by the UOU indicator. We find that this indicator not only measures the negative correlation between the firm’s UOU and its stock returns, but also serves as a good risk and pricing indicator for the excessive stock returns. Robust tests based on industry, market conditions, and macroeconomic environments indicate our findings are still valid. We, therefore, believe our empirical findings provide a good reference for the investment decision-making process. Journal: Journal of Behavioral Finance Pages: 316-326 Issue: 3 Volume: 23 Year: 2022 Month: 7 X-DOI: 10.1080/15427560.2020.1867550 File-URL: http://hdl.handle.net/10.1080/15427560.2020.1867550 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:3:p:316-326 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2081972_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Adriana Breaban Author-X-Name-First: Adriana Author-X-Name-Last: Breaban Author-Name: Cary Deck Author-X-Name-First: Cary Author-X-Name-Last: Deck Author-Name: Erik Johnson Author-X-Name-First: Erik Author-X-Name-Last: Johnson Title: Emotional Differences between Isomorphic Auctions Abstract: First price and Dutch auctions are theoretically isomorphic, but previous experiments report that the institutions are not behaviorally isomorphic. This article uses facial analysis of video recordings of laboratory experiments to investigate whether these auctions invoke different emotional responses from bidders. The results indicate that bidders are angrier during the Dutch auction and that winners exhibit more contempt after the first price auction. Overall, subjects in both auctions appear to be mostly bored and depressed, but there is evidence that bidders exhibit more positive emotions as prices fall in the Dutch auction. Journal: Journal of Behavioral Finance Pages: 427-437 Issue: 4 Volume: 23 Year: 2022 Month: 11 X-DOI: 10.1080/15427560.2022.2081972 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2081972 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:4:p:427-437 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2081971_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Joy Buchanan Author-X-Name-First: Joy Author-X-Name-Last: Buchanan Author-Name: Laura Razzolini Author-X-Name-First: Laura Author-X-Name-Last: Razzolini Title: How Dictators Use Information about Recipients Abstract: This paper explores the extent to which altruism is influenced by the salient features of the beneficiaries. We investigate how information presented to senders affects their perception of the recipient in a dictator game. In this environment, the starting endowment of a recipient can be inferred from choices the recipient made. Dictators give the same amount to all recipients regardless of the choices they made, despite the revealed preference to send more money to recipients who started with lower endowments. Dictators give very little when they are explicitly told that a recipient started with a high endowment. However, when dictators are only told that the recipient made a choice that indicates they started with a high endowment, dictators do not incorporate that information. Dictators are not more generous to others who made a similar financial choice to themselves, through in-group bias. An implication from our results is that charitable donors are influenced by salient information about recipients and do not try to infer deservingness beyond what is explicitly presented. Journal: Journal of Behavioral Finance Pages: 408-426 Issue: 4 Volume: 23 Year: 2022 Month: 11 X-DOI: 10.1080/15427560.2022.2081971 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2081971 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:4:p:408-426 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2081970_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Jason Shachat Author-X-Name-First: Jason Author-X-Name-Last: Shachat Author-Name: Anand Srinivasan Author-X-Name-First: Anand Author-X-Name-Last: Srinivasan Title: Informational Price Cascades and Non-Aggregation of Asymmetric Information in Experimental Asset Markets Abstract: We report on experimental markets which generate an abject failure of the aggregation of asymmetric information. While realized prices have zero correlation with fundamental values, surprisingly, these are not highly volatile. The non-aggregation of information manifests as prices which lock into home grown norms that we call informational price cascades. Our results are in stark contrast to previous experiments testing fully revealing rational expectations equilibrium under asymmetric information and others examining social learning in asset markets when there is a rational market maker. Our experiments incorporate the asset and information structures from the latter into the decentralized private information setting and double auction trading mechanism of the former. Information only starts to aggregate when either each private signal is revealed to half of the traders, or all private signals are simultaneously released early in the asset’s issue. Journal: Journal of Behavioral Finance Pages: 388-407 Issue: 4 Volume: 23 Year: 2022 Month: 11 X-DOI: 10.1080/15427560.2022.2081970 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2081970 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:4:p:388-407 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2081974_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Mark Schneider Author-X-Name-First: Mark Author-X-Name-Last: Schneider Author-Name: Timothy Shields Author-X-Name-First: Timothy Author-X-Name-Last: Shields Title: Motives for Cooperation in the One-Shot Prisoner’s Dilemma Abstract: We investigate the motives for cooperation in the one-shot Prisoner’s Dilemma (PD). A prior study finds that cooperation rates in one-shot PD games can be ranked empirically by the social surplus from cooperation. That study employs symmetric payoffs from cooperation in simultaneous PD games. Hence, in that setting, it is not possible to discern the motives for cooperation since three prominent social welfare criteria, social surplus (efficiency) preferences, Rawlsian maximin preferences, and inequity aversion make the same predictions. In the present paper, we conduct an experiment to identify which of these social preferences best explains differences in cooperation rates and to study the effects of the risk of non-cooperation. Journal: Journal of Behavioral Finance Pages: 438-456 Issue: 4 Volume: 23 Year: 2022 Month: 11 X-DOI: 10.1080/15427560.2022.2081974 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2081974 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:4:p:438-456 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2105340_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Brian Bruce Author-X-Name-First: Brian Author-X-Name-Last: Bruce Title: Letter from the Editor Journal: Journal of Behavioral Finance Pages: 367-367 Issue: 4 Volume: 23 Year: 2022 Month: 11 X-DOI: 10.1080/15427560.2022.2105340 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2105340 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:4:p:367-367 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100388_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Mark DeSantis Author-X-Name-First: Mark Author-X-Name-Last: DeSantis Author-Name: David Porter Author-X-Name-First: David Author-X-Name-Last: Porter Title: Introduction to the Special Issue in Honor of Professor Vernon Lomax Smith Journal: Journal of Behavioral Finance Pages: 368-370 Issue: 4 Volume: 23 Year: 2022 Month: 11 X-DOI: 10.1080/15427560.2022.2100388 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100388 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:4:p:368-370 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2081973_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Zhongming Cheng Author-X-Name-First: Zhongming Author-X-Name-Last: Cheng Author-Name: Shengle Lin Author-X-Name-First: Shengle Author-X-Name-Last: Lin Title: Return Predictability in Laboratory Asset Markets Abstract: Empirical studies find that the order imbalance of retail trades can predict future stock returns. The authors investigated the cause of the puzzle using data from the laboratory asset markets in which inexperienced subjects trade in a single asset market (SSW design). The authors found that the retail order imbalance in period t positively predicted returns in period t + 1 in laboratory markets. The existence of return predictability in laboratory markets in which insider information or institutional investors are absent suggests that the predictability is not contingent upon private information or the activities of institutional investors, thus diminishing support of theories relying on these 2 conditions. In addition, the authors found that the return predictability in lab results was stronger and more statistically significant when the subjects were more excited. They tested this novel lab finding in empirical data and confirmed that return predictability is more robust when the market sentiment is higher. The findings suggest that the cause of the return predictability is likely linked to speculative activities. Journal: Journal of Behavioral Finance Pages: 457-465 Issue: 4 Volume: 23 Year: 2022 Month: 11 X-DOI: 10.1080/15427560.2022.2081973 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2081973 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:4:p:457-465 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2055032_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Jason A. Aimone Author-X-Name-First: Jason A. Author-X-Name-Last: Aimone Author-Name: Xiaofei Pan Author-X-Name-First: Xiaofei Author-X-Name-Last: Pan Title: My Risk, Your Risk, and Our Risk: Costly Deviation in Delegated Risk-Taking Environments Abstract: Risk choice delegation is pervasive in financial environments. While previous research has explored how agents balance self-interest with interests of passive investors little is known about how this balance is achieved when investors voluntarily decide the amount to invest or when risk is shared between agents and investors. Our findings show agents engage in costly deviation from their preferred risk level when choosing risk exposure levels, revealing a form of prosocial preferences. We further find that this deviation is sensitive to investment levels and institutional features like whether risk is shared and accountability opportunities by investors or a third party. Journal: Journal of Behavioral Finance Pages: 371-387 Issue: 4 Volume: 23 Year: 2022 Month: 11 X-DOI: 10.1080/15427560.2022.2055032 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2055032 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:23:y:2022:i:4:p:371-387 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1913161_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: James Smith Author-X-Name-First: James Author-X-Name-Last: Smith Author-Name: Lisa Koonce Author-X-Name-First: Lisa Author-X-Name-Last: Koonce Title: Can Investors Adjust for Managerial Bias? Abstract: Financial information from firms often contains biased information. In this study, we posit and experimentally test the idea that investors will have difficulty in unraveling known biases in management’s earnings forecasts but will be most likely to fully adjust when the information about bias is in quantitative, EPS form and the investor’s judgment is compatible with that bias information (also in quantitative, EPS form). Results from three experiments suggest that indeed quantification and compatibility are beneficial for unraveling managerial bias, but even under these conditions not all investors are able to unravel. We also show that this result is robust to several moderator variables that capture factors that are commonly found in the management earnings forecast setting. Our study has implications for firm managers, regulators, and investors. Journal: Journal of Behavioral Finance Pages: 41-55 Issue: 1 Volume: 24 Year: 2023 Month: 1 X-DOI: 10.1080/15427560.2021.1913161 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1913161 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:1:p:41-55 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1949596_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Reuben Segara Author-X-Name-First: Reuben Author-X-Name-Last: Segara Author-Name: Bochen Wu Author-X-Name-First: Bochen Author-X-Name-Last: Wu Author-Name: Juan Yao Author-X-Name-First: Juan Author-X-Name-Last: Yao Title: To Herd or Not to Herd: Do Intangible Assets Affect the Behavior of Financial Analyst Recommendations? Abstract: The extent to which financial analysts provide “herd” rather than “bold” (or anti-herd) earnings forecasts has important implications for market efficiency. Identifying any contributing factor(s) for financial analyst herding behavior can lead to policies to help reduce such harmful conduct. Our 2 proxies for intangible asset intensity are found to have a differential impact on analyst herding behavior. More specifically, increases in firm-specific reported balance sheet intangible assets (level of patents granted) are associated with heightened (reduced) herding behavior. Our findings highlight the need for regulatory reforms such as more transparent disclosure, and standardized accounting treatment to better capture a firm’s investment in intangible assets in their financial statements. Journal: Journal of Behavioral Finance Pages: 97-110 Issue: 1 Volume: 24 Year: 2023 Month: 1 X-DOI: 10.1080/15427560.2021.1949596 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1949596 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:1:p:97-110 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1917579_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Xolani Sibande Author-X-Name-First: Xolani Author-X-Name-Last: Sibande Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Name: Riza Demirer Author-X-Name-First: Riza Author-X-Name-Last: Demirer Author-Name: Elie Bouri Author-X-Name-First: Elie Author-X-Name-Last: Bouri Title: Investor Sentiment and (Anti) Herding in the Currency Market: Evidence from Twitter Feed Data Abstract: This paper establishes a direct link between (anti) herding behavior in currency markets and investor sentiment, proxied by a social media based investor happiness index built on Twitter feed data. Our analysis of daily data for nine developed market currencies suggests that the foreign exchange market is generally characterized by strong anti-herding behavior. Utilizing the quantile-on-quantile (QQ) approach, developed by Sim and Zhou (2015), we show that the relationship between investor sentiment and anti-herding is in fact regime specific, with anti-herding behavior particularly prominent during states of extreme investor sentiment. The effect of sentiment on anti-herding is generally stronger in extreme bullish sentiment states, while average sentiment is associated with less severe anti-herding. The findings lend support to the behavioral factors for asset pricing models and suggest that real time investor sentiment signals can be utilized to monitor potential speculative activities in the currency market. Journal: Journal of Behavioral Finance Pages: 56-72 Issue: 1 Volume: 24 Year: 2023 Month: 1 X-DOI: 10.1080/15427560.2021.1917579 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1917579 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:1:p:56-72 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1949719_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Name: Jacobus Nel Author-X-Name-First: Jacobus Author-X-Name-Last: Nel Author-Name: Christian Pierdzioch Author-X-Name-First: Christian Author-X-Name-Last: Pierdzioch Title: Investor Confidence and Forecastability of US Stock Market Realized Volatility: Evidence from Machine Learning Abstract: Using a machine-learning technique known as random forests, we analyze the role of investor confidence in forecasting monthly aggregate realized stock-market volatility of the United States (US), over and above a wide-array of macroeconomic and financial variables. We estimate random forests on data for a period from 2001 to 2020, and study horizons up to one year by computing forecasts for recursive and a rolling estimation window. We find that investor confidence, and especially investor confidence uncertainty has out-of-sample predictive value for overall realized volatility, as well as its “good” and “bad” variants. Our results have important implications for investors and policymakers. Journal: Journal of Behavioral Finance Pages: 111-122 Issue: 1 Volume: 24 Year: 2023 Month: 1 X-DOI: 10.1080/15427560.2021.1949719 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1949719 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:1:p:111-122 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1913158_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Yuka Nishikawa Author-X-Name-First: Yuka Author-X-Name-Last: Nishikawa Author-Name: Mohammad Hashemi Joo Author-X-Name-First: Mohammad Author-X-Name-Last: Hashemi Joo Author-Name: Ali M. Parhizgari Author-X-Name-First: Ali M. Author-X-Name-Last: Parhizgari Title: Languages and Dividend Policy Abstract: The Sapir-Whorf hypothesis theorizes that the structure of a language may affect the way that its speakers think. We investigate if there is a significant difference in dividend policy of firms headquartered in a country whose primary language uses a strong future-time reference (FTR) compared with a country that uses a weak FTR language. We posit that use of future tense to describe future events increases the mental distance from the future, and as a result, reduces a person's concern about the future. As today’s dividend policy is determined based on both today’s and future expected performance of the firm, we hypothesize that firms in strong FTR language speaking countries follow a dividend policy to pay out more today than firms in weak FTR language speaking countries. Our empirical results confirm this hypothesis as we find higher dividend payouts by firms in strong FTR countries than in weak FTR countries. We further investigate if firms in strong FTR countries make changes in dividend policy more frequently than firms in weak FTR countries. Journal: Journal of Behavioral Finance Pages: 22-40 Issue: 1 Volume: 24 Year: 2023 Month: 1 X-DOI: 10.1080/15427560.2021.1913158 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1913158 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:1:p:22-40 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1948854_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Richard LaRocca Author-X-Name-First: Richard Author-X-Name-Last: LaRocca Author-Name: Randall Valentine Author-X-Name-First: Randall Author-X-Name-Last: Valentine Author-Name: Thomas Cunningham Author-X-Name-First: Thomas Author-X-Name-Last: Cunningham Title: Irrational Exuberance or the Money-Trust Power Grab: Was the Panic of 1907 Truly a Speculative Bubble or a Financial Coup D'état? Abstract: The Panic of 1907 was largely attributed to several factors, including strong economic growth, high levels of liquidity in the financial system, the ability and willingness of speculators to take significant risk in the stock market, and a banking system without proper checks and balances. These factors all combined to create volatile stock market returns in the United States that are indicative of market bubbles. This paper examined whether a speculative bubble was present in US equity prices during the Panic of 1907 using data from the Cowles Commission. We found that there was no bubble present in stock valuations in the United States during this period and that the Panic of 1907 was a mitigated economic event rather than the fallout of stock speculation. One such contributing factor may lie in the idea that JP Morgan and his House of Morgan were the intervening factor which tempered and stabilized market fundamentals. Their actions of playing the surrogate role of lender of last resort and of containing any financial crises, manias, or panics during this period prior to the Aldrich-Vreeland Act of 1908 and the creation of the Federal Reserve in 1913 may have influenced the quelling of a speculative bubble in 1907. Journal: Journal of Behavioral Finance Pages: 123-130 Issue: 1 Volume: 24 Year: 2023 Month: 1 X-DOI: 10.1080/15427560.2021.1948854 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1948854 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:1:p:123-130 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1948853_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Ahmed Bouteska Author-X-Name-First: Ahmed Author-X-Name-Last: Bouteska Author-Name: Mehdi Mili Author-X-Name-First: Mehdi Author-X-Name-Last: Mili Title: The Role of Investor Sentiment and Valuation Uncertainty in the Changes around Analyst Recommendations: Evidence from U.S. Firms Abstract: The authors investigate the empirical relation among investor sentiment, valuation uncertainty, and announcements of changes in analyst recommendation decisions among U.S. firms. Recent behavioral finance evidence shows market sentiment to have predictive content that affects the classical relationship between analyst recommendations and stock return dynamics. Contrary to this evidence, the authors find that degree of valuation uncertainty is associated to the impact of investor sentiment when examining a likelihood of consensus recommendation upgrade or downgrade. While not totally eliminating the significant investor sentiment effect under high valuation uncertainty, the investor sentiment does not powerfully explain the stock market reactions to analyst recommendation changes under low valuation uncertainty. Furthermore, the authors show that analyst recommendations provide significant buy or sell signals if valuation uncertainty is great, referring to the market being highly competitive. However, in less competitive markets, analyst reports become less informative. Overall, the authors demonstrate that magnitude of valuation uncertainty is an important complement to investor sentiment for further understanding analyst recommendations. Journal: Journal of Behavioral Finance Pages: 73-96 Issue: 1 Volume: 24 Year: 2023 Month: 1 X-DOI: 10.1080/15427560.2021.1948853 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1948853 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:1:p:73-96 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1892678_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Numan Ülkü Author-X-Name-First: Numan Author-X-Name-Last: Ülkü Author-Name: Olena Onishchenko Author-X-Name-First: Olena Author-X-Name-Last: Onishchenko Title: Institutional Overcrowding Everyday Abstract: We operationalize Stein’s (2009) overcrowding concept in the context of investor response to daily stock return shocks and examine its underlying behavioral motivation. We define chasing at the overshooting point as evidence of overcrowding. Using trading data by investor type from Korea, we find that while institutional investors display informed trading, they fail to recognize the predictable overshooting point when responding to return shocks and/or accompanying information, resulting in an overcrowded response. The main consequence is suffering a cost of immediacy. Size of institutional crowding is positively related to the size of initial response and institutional investor population, but unrelated to future returns, with no evidence of adapting to past performance; collectively consistent with overcrowding driven by aversion to miss out. Journal: Journal of Behavioral Finance Pages: 1-21 Issue: 1 Volume: 24 Year: 2023 Month: 1 X-DOI: 10.1080/15427560.2021.1892678 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1892678 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:1:p:1-21 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1949718_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Qiang Bu Author-X-Name-First: Qiang Author-X-Name-Last: Bu Title: Are All the Sentiment Measures the Same? Abstract: The author examines whether the direct and indirect sentiment measures are distinct from each other. The author finds that the 2 types of sentiment measures have a relatively low correlation between them. The direct sentiment measures have significant explanatory power on contemporaneous stock returns, whereas the indirect sentiment measures have a lagging effect in such explanatory power. If both sentiment measures are used in a model, one can observe a strong synergistic effect in adjusted R2. One can find that the indirect measures’ predictive power on future stock return is remarkably higher than that of the direct measures. Also, the indirect measures are mainly driven by short-term interest rate, whereas stock returns most drive the direct measures. Journal: Journal of Behavioral Finance Pages: 161-170 Issue: 2 Volume: 24 Year: 2023 Month: 4 X-DOI: 10.1080/15427560.2021.1949718 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1949718 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:161-170 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1950723_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Anamika Author-X-Name-First: Author-X-Name-Last: Anamika Author-Name: Madhumita Chakraborty Author-X-Name-First: Madhumita Author-X-Name-Last: Chakraborty Author-Name: Sowmya Subramaniam Author-X-Name-First: Sowmya Author-X-Name-Last: Subramaniam Title: Does Sentiment Impact Cryptocurrency? Abstract: This study examines the impact of investor sentiment on cryptocurrency returns. We use a direct survey-based measure that captures the investors’ sentiment on Bitcoins. This direct measure of Bitcoin investor sentiment is obtained from the Sentix database. The results of the study found that the Bitcoin prices experience appreciation when investors are optimistic about Bitcoin. Bitcoin sentiment has significant power in predicting the Bitcoin prices after controlling for the relevant factors. There is also evidence that the sentiment of the dominant cryptocurrency, i.e., Bitcoin, influences the price of other cryptocurrencies. Further, we extend our analysis by investigating the impact of equity market sentiment on cryptocurrency returns. We proxy equity market sentiment using two measures viz: Baker-Wurgler sentiment Index and the VIX Index. When the equity market investors’ sentiment is bearish, cryptocurrency prices rise, indicating that cryptocurrency can act as an alternative avenue for investment. Our results remain unaffected after controlling for potential factors that could impact cryptocurrency prices. Journal: Journal of Behavioral Finance Pages: 202-218 Issue: 2 Volume: 24 Year: 2023 Month: 4 X-DOI: 10.1080/15427560.2021.1950723 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1950723 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:202-218 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1975713_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Petros Messis Author-X-Name-First: Petros Author-X-Name-Last: Messis Author-Name: Antonis Alexandridis Author-X-Name-First: Antonis Author-X-Name-Last: Alexandridis Author-Name: Achilleas Zapranis Author-X-Name-First: Achilleas Author-X-Name-Last: Zapranis Title: The Effects of Herding on Betas and Idiosyncratic Risk Abstract: This paper investigates the consequences of herding on systematic and idiosyncratic risk for stocks traded on S&P 500. Herding behavior is measured through a state-space model. Using monthly data from 1999 to 2017, different periods of herding and adverse herding are present. Evidence shows that the state space model identifies the significant herding effects on both risk measures for specific portfolios. Our findings validate the expected implications of herding on betas but not of adverse herding. In addition, the low-beta anomaly is not confirmed on our beta-based portfolios. On the other hand, we confirm the risk-return relationship. We attribute this evidence to overpriced values of high beta assets as well as to the effects of adverse herding on the systematic and idiosyncratic risk. Finally, we also show that the herding level could serve as a systematic driver of returns improving the portfolio performance of traditional ‘anomaly’ based strategies. Journal: Journal of Behavioral Finance Pages: 131-146 Issue: 2 Volume: 24 Year: 2023 Month: 4 X-DOI: 10.1080/15427560.2021.1975713 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1975713 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:131-146 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1949717_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Aditya Ganesh Author-X-Name-First: Aditya Author-X-Name-Last: Ganesh Author-Name: Subramanian Iyer Author-X-Name-First: Subramanian Author-X-Name-Last: Iyer Title: Impact of Firm-Initiated Tweets on Stock Return and Trading Volume Abstract: Recent SEC guidelines enabled many Fortune 500 companies to actively adopt social media, such as Twitter, to disseminate information. In this paper, we analyze the relationship between tweets by corporations and stock returns. Our study used over 1.2 million corporate tweets made by thirty companies in the Dow Jones Industrial Average between April 2013 and July 2020. The shocks from the frequency of corporate tweets can positively impact stock returns and trading volume. We, therefore, examine causality and impulse response between frequency of corporate tweets, stock returns, and changes in trading volume using a vector autoregression model. Our findings indicate that 43 percent of stocks exhibit Granger causality between firm-initiated tweets and changes in trading volume. We find evidence consistent with the attention-induced price pressure hypothesis proposed by Barber and Odean. We observe that a shock in corporate tweeting behavior translates into a positive effect on changes in trading volume and returns in 73 percent and 60 percent of stocks, respectively. These results are significant for developing appropriate social media communication strategies. The findings are also valuable for investors and traders who can deploy forecasting models utilizing corporate tweets to earn superior returns. Journal: Journal of Behavioral Finance Pages: 171-182 Issue: 2 Volume: 24 Year: 2023 Month: 4 X-DOI: 10.1080/15427560.2021.1949717 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1949717 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:171-182 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1974443_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Zhen Yu Author-X-Name-First: Zhen Author-X-Name-Last: Yu Author-Name: Michael D. Wang Author-X-Name-First: Michael D. Author-X-Name-Last: Wang Author-Name: Xiangdong Wei Author-X-Name-First: Xiangdong Author-X-Name-Last: Wei Author-Name: Jie Lou Author-X-Name-First: Jie Author-X-Name-Last: Lou Title: News Credibility and Influence within the Financial Markets Abstract: How does information credibility, a subjective judgment of investors, affect empirical asset pricing in financial markets? Traditional economic theories are inadequate for interpreting market responses driven by people’s subjective thinking, as these cognitive processes are not encompassed by the concept of utility. We explore these effects by using computational linguistics and deep structured learning algorithms to analyze financial newspapers and social media posts. After controlling for factors related to content and market momentum in our narrative based credibility indicator, we find that news credibility is positively correlated with the returns on assets preferred by experts and negatively correlated with assets preferred by gamblers. Based on this finding, we point out that the efficient-market hypothesis (EMH) is not appropriate in the dominant market of gamblers in the short-term. In the long-term, however, investment motivation does not significantly affect the validity of the hypothesis. Journal: Journal of Behavioral Finance Pages: 238-257 Issue: 2 Volume: 24 Year: 2023 Month: 4 X-DOI: 10.1080/15427560.2021.1974443 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1974443 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:238-257 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1949715_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Ran Barniv Author-X-Name-First: Ran Author-X-Name-Last: Barniv Author-Name: Wei Li Author-X-Name-First: Wei Author-X-Name-Last: Li Author-Name: Timothy Miller Author-X-Name-First: Timothy Author-X-Name-Last: Miller Title: Independence of Intrinsic Valuations and Stock Recommendations – Experimental Evidence from Equity Research Analysts and Investors Abstract: Motivated by the mixed findings in prior archival studies, this study conducts three experiments to examine the relationships among analysts’ intrinsic valuation estimates (V), stock recommendations (REC) and stock returns. Experiment 1, built on implications from prospect theory, provides direct observations on analysts’ asymmetric use of the valuation to price (V/P) ratio in making their REC. Experiments 2 and 3 indicate differences and similarities between professional and nonprofessional investors in using analysts’ V and REC in making their investment-related judgments. Our results provide implications for both research and practice. Journal: Journal of Behavioral Finance Pages: 147-160 Issue: 2 Volume: 24 Year: 2023 Month: 4 X-DOI: 10.1080/15427560.2021.1949715 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1949715 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:147-160 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1949716_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Mohammad Hashemi Joo Author-X-Name-First: Mohammad Author-X-Name-Last: Hashemi Joo Author-Name: Edward Lawrence Author-X-Name-First: Edward Author-X-Name-Last: Lawrence Author-Name: Yuka Nishikawa Author-X-Name-First: Yuka Author-X-Name-Last: Nishikawa Title: Founder-Led Firms and Operational Litigation Risk Abstract: This study investigates the relationship between founder-led firms and non-securities (operational) litigation risk. We postulate lower operational litigation risk for founder-led firms than for nonfounder-led firms based on founder-CEOs’ limited agency conflicts and stronger emotional attachment to the firms they establish. Our empirical results suggest that having a founder as CEO mitigates the risk of being involved in operational lawsuits that could result in substantial financial losses and long-lasting negative consequences. Journal: Journal of Behavioral Finance Pages: 183-201 Issue: 2 Volume: 24 Year: 2023 Month: 4 X-DOI: 10.1080/15427560.2021.1949716 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1949716 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:183-201 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1971983_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20220907T060133 git hash: 85d61bd949 Author-Name: Zhilu Lin Author-X-Name-First: Zhilu Author-X-Name-Last: Lin Author-Name: Wentao Wu Author-X-Name-First: Wentao Author-X-Name-Last: Wu Author-Name: Haoran Zhang Author-X-Name-First: Haoran Author-X-Name-Last: Zhang Title: Momentum, Information, and Herding Abstract: This study investigates the potential explanations to the momentum effect on the equity market. We primarily discuss the underreaction hypothesis, the overreaction hypothesis, and the impact of herding behavior. We find that the momentum effect disappeared after decimalization in all size deciles, which does not support the underreaction hypothesis. We also find that momentum profits do not exist in any intangible assets or R&D expenses deciles, which is not consistent with the continuous overreaction hypothesis. We further investigate the impact of herding behavior on the momentum effect. Using a new firm-level herding measurement, we find that investors require higher returns in high herding stocks and they require even higher returns in high herding stocks among previous losers, indicating that investors herd against the previous losers while they herd toward the winners. Journal: Journal of Behavioral Finance Pages: 219-237 Issue: 2 Volume: 24 Year: 2023 Month: 4 X-DOI: 10.1080/15427560.2021.1971983 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1971983 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:219-237 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1975717_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Jiancheng Shen Author-X-Name-First: Jiancheng Author-X-Name-Last: Shen Author-Name: John Griffith Author-X-Name-First: John Author-X-Name-Last: Griffith Author-Name: Mohammad Najand Author-X-Name-First: Mohammad Author-X-Name-Last: Najand Author-Name: Licheng Sun Author-X-Name-First: Licheng Author-X-Name-Last: Sun Title: Predicting Stock and Bond Market Returns with Emotions: Evidence from Futures Markets Abstract: We explore the ability of market emotions (fear, gloom, joy, optimism) to predict S&P 500 Index and 10-year Treasury notes futures returns by utilizing VAR and TGARCH models. In our VAR models, we find that one of four emotions (fear) has predictive power for stock index futures returns. We also find Treasury futures market returns are influenced by joy and optimism measures of emotions. Further, we employ a TGARCH model with anemotional sentiment measure (fear) and find that fear has a major effect on the market returns and conditional volatility of futures markets. Journal: Journal of Behavioral Finance Pages: 333-344 Issue: 3 Volume: 24 Year: 2023 Month: 7 X-DOI: 10.1080/15427560.2021.1975717 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1975717 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:3:p:333-344 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1973006_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Hana Dvorackova Author-X-Name-First: Hana Author-X-Name-Last: Dvorackova Author-Name: Tomas Tichy Author-X-Name-First: Tomas Author-X-Name-Last: Tichy Author-Name: Marek Jochec Author-X-Name-First: Marek Author-X-Name-Last: Jochec Title: How Do Limit Orders Affect the Disposition Effect on Highly Liquid Markets – Experimental Finance Evidence Abstract: We examine the effect of selected limit order tools (stop loss, take profit, and trailing stop) on the disposition effect, a well-known behavioral bias, by using experimental trading data. Our presumption is that the limit orders should significantly eliminate this behavioral bias, which may lead to higher losses than feasible for a trader. The traders of our data sample can be considered as a sample of beginners or less informed traders. Based on our analysis it is possible to conclude that limit orders have a significant impact on the disposition effect. Traders using these tools were able not only to avoid this behavioral bias, but even reverse it, which is, as far as we know, a unique result within the existing literature. Moreover, we found out that the impact of eliminating of the disposition effect by limit orders use is positive, as it may lead to significant loss reduction. On the other hand, the effect on profits is insignificant. Journal: Journal of Behavioral Finance Pages: 290-302 Issue: 3 Volume: 24 Year: 2023 Month: 7 X-DOI: 10.1080/15427560.2021.1973006 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1973006 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:3:p:290-302 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1974444_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: David J. Streich Author-X-Name-First: David J. Author-X-Name-Last: Streich Title: Risk Preference Elicitation and Financial Advice Taking Abstract: Financial advisors rely on accurate measures of investor risk preferences. This study compares different risk elicitation methods (REMs) in terms of their perceived suitability and impact on financial advice taking. The results suggest that the perceived suitability of the suggested risk profile strongly predicts delegation to an advisory tool. REMs differ in terms of their perceived process similarity with the investor, which positively affects suitability (and thus, delegation) directly and through its positive effect on source credibility. Differences were also found with regards to the perceived complexity of the risk profiling task, which is positively related to suitability. In summary, the findings imply that applying suitable REMs matters not only because it avoids misrepresentation of an investor’s true risk preferences, but because it directly affects the propensity to delegate financial decision-making. Journal: Journal of Behavioral Finance Pages: 259-275 Issue: 3 Volume: 24 Year: 2023 Month: 7 X-DOI: 10.1080/15427560.2021.1974444 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1974444 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:3:p:259-275 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1983576_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Oguzhan Cepni Author-X-Name-First: Oguzhan Author-X-Name-Last: Cepni Author-Name: Rangan Gupta Author-X-Name-First: Rangan Author-X-Name-Last: Gupta Author-Name: Qiang Ji Author-X-Name-First: Qiang Author-X-Name-Last: Ji Title: Sentiment Regimes and Reaction of Stock Markets to Conventional and Unconventional Monetary Policies: Evidence from OECD Countries Abstract: In this paper, we investigate how conventional and unconventional monetary policy shocks affect the stock market of eight advanced economies, namely, Canada, France, Germany, Japan, Italy, Spain, the U.K., and the U.S., conditional on the state of sentiment. In this regard, we use a panel vector auto-regression (VAR) with monthly data (on output, prices, equity prices, metrics of monetary policies, and consumer and business sentiments) over the period of January 2007 till July 2020, with the monetary policy shock identified through the use of both zero and sign restrictions. We find robust evidence that, compared to the low investor sentiment regime, the reaction of stock prices to expansionary monetary policy shocks is stronger in the state associated with relatively higher optimism, both for the overall panel and the individual countries (with some degree of heterogeneity). Our findings have important implications for academicians, investors, and policymakers. Journal: Journal of Behavioral Finance Pages: 365-381 Issue: 3 Volume: 24 Year: 2023 Month: 7 X-DOI: 10.1080/15427560.2021.1983576 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1983576 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:3:p:365-381 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1975716_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Hammad Siddiqi Author-X-Name-First: Hammad Author-X-Name-Last: Siddiqi Author-Name: Austin Murphy Author-X-Name-First: Austin Author-X-Name-Last: Murphy Title: The Resource-Constrained Brain: A New Perspective on the Equity Premium Puzzle Abstract: Findings from brain sciences show that the brain must first optimize on its own internal resources before seeking to optimize on the resources available in the external world. We show that this modest change in perspective, from resource-constrained humans to resource-constrained brains, provides a new perspective on how assets are priced in financial markets. We show that the brain-centric perspective potentially lowers the risk aversion needed to reconcile consumption data with asset prices and can contribute to countercyclical equity premia. We show that the brain-centric perspective can be easily integrated with several existing approaches on the equity premium puzzle. Journal: Journal of Behavioral Finance Pages: 315-332 Issue: 3 Volume: 24 Year: 2023 Month: 7 X-DOI: 10.1080/15427560.2021.1975716 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1975716 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:3:p:315-332 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1975285_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Derya Güler Author-X-Name-First: Derya Author-X-Name-Last: Güler Title: The Impact of Investor Sentiment on Bitcoin Returns and Conditional Volatilities during the Era of Covid-19 Abstract: This paper studies the impact of investor sentiment on the Bitcoin returns and conditional volatility taking into account the Covid-19 outbreak by using different investor sentiment proxies and by employing the EGARCH model. Estimation results show that investor sentiment has a positive impact on the Bitcoin returns and their volatility, especially after the Covid-19 outbreak. The VAR model is employed to investigate whether investor sentiment and Bitcoin returns are related in a dynamic setting and to make distinguish between rational and irrational investor sentiments. The results from the VAR model show that both rational and irrational investor sentiments have an impact on Bitcoin returns indicating that the Bitcoin market is also driven by emotions and noise traders have an impact on the data generating process of Bitcoin returns. The positive impact of investor sentiment can be attributed to the fear of missing out (FOMO) behavior of speculative and irrational investors. Journal: Journal of Behavioral Finance Pages: 276-289 Issue: 3 Volume: 24 Year: 2023 Month: 7 X-DOI: 10.1080/15427560.2021.1975285 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1975285 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:3:p:276-289 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1974442_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Sam Kim Author-X-Name-First: Sam Author-X-Name-Last: Kim Author-Name: Jimmy Lockwood Author-X-Name-First: Jimmy Author-X-Name-Last: Lockwood Author-Name: Larry Lockwood Author-X-Name-First: Larry Author-X-Name-Last: Lockwood Author-Name: Hong Miao Author-X-Name-First: Hong Author-X-Name-Last: Miao Title: Determinants of Put-Call Disparity: Kospi 200 Index Options Abstract: Many studies find that traditional option pricing models fail to work in practice. The implied volatility smile is one example. In this study, we examine deviations of spot prices from prices implied by put-call parity for Korean KOSPI 200 index options, one of the most actively traded derivative products in the world. Deviations are significant and economically meaningful across different moneyness categories spanning deep-in-the-money to deep-out-of-the-money options. Determinants of put-call disparities for the KOSPI 200 index options include past spot return moments, cognitive biases, and prior option trading volume relative to spot trading volume. We show mispricing is more likely to occur after periods of extreme downturns in the stock market, implying demand for put options increases relative to call options when investors become more likely to insure against extreme loss. We also show that put-call disparity rates have predictive power for future spot returns due to overreaction of KOSPI 200 index option traders, rather than to information contained in option prices. Journal: Journal of Behavioral Finance Pages: 303-314 Issue: 3 Volume: 24 Year: 2023 Month: 7 X-DOI: 10.1080/15427560.2021.1974442 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1974442 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:3:p:303-314 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1975715_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Minki Kim Author-X-Name-First: Minki Author-X-Name-Last: Kim Author-Name: Toyoung Kim Author-X-Name-First: Toyoung Author-X-Name-Last: Kim Author-Name: Tong Suk Kim Author-X-Name-First: Tong Suk Author-X-Name-Last: Kim Title: V-Shaped Disposition Effect, Stock Prices, and Post-Earnings-Announcement Drift: Evidence from Korea Abstract: This study investigates the impact of the V-shaped disposition effect on asset prices in the Korean stock market, which is characterized by a high proportion of retail investors. By utilizing a specified dataset containing stock-level information on the trading activities of different types of investors, we find evidence to support the presence of V-shaped net selling propensity in the Korean stock market. In addition, we find that net selling pressure has a positive effect on the cross-section of subsequent stock returns, and this relationship appears only when accounting for individual trading. Furthermore, this net selling propensity of retail investors delays the incorporation of good news into stock price, while helps stock price reflect its bad news. We show that good (bad) news lead to positive (negative) drifts in stock prices following earnings announcements in the presence (paucity) of investors exhibiting the V-shaped disposition. Journal: Journal of Behavioral Finance Pages: 345-364 Issue: 3 Volume: 24 Year: 2023 Month: 7 X-DOI: 10.1080/15427560.2021.1975715 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1975715 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:3:p:345-364 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2047684_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Qingzhong Ma Author-X-Name-First: Qingzhong Author-X-Name-Last: Ma Author-Name: David Whidbee Author-X-Name-First: David Author-X-Name-Last: Whidbee Author-Name: Wei Zhang Author-X-Name-First: Wei Author-X-Name-Last: Zhang Title: Behavioral Biases and the Asset Growth Anomaly Abstract: We find evidence that the asset growth anomaly is due, in part, to investors’ behavioral biases. Two-way sorts based on asset growth and proxies for known behavioral biases (anchoring, recency, nominal price illusion, and lottery-seeking) indicate that the asset growth anomaly is stronger in stocks that investors affected by behavioral biases tend to buy and non-existent or negative in stocks they tend to sell. These results are not explained by limits of arbitrage or investor sentiment and hold in both portfolio analyses and regressions. The evidence suggests that behavioral investors’ attraction to certain stocks drives the asset growth anomaly. Journal: Journal of Behavioral Finance Pages: 511-529 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2022.2047684 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2047684 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:511-529 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1995735_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Jae Jung Han Author-X-Name-First: Jae Jung Author-X-Name-Last: Han Author-Name: Hyun-jung Kim Author-X-Name-First: Hyun-jung Author-X-Name-Last: Kim Title: Prediction of Investor-Specific Trading Trends in South Korean Stock Markets Using a BiLSTM Prediction Model Based on Sentiment Analysis of Financial News Articles Abstract: Stock market performance is determined by supply and demand of individual, institutional, and foreign investors, who increasingly use media such as news articles for decision-making. We present a bidirectional long short term memory model to forecast trading trends based on statistically significant investor-specific topics from financial news datasets. The application of this study shows three valuable results: (i) topics significantly meaningful to each investor type differ, (ii) investors show different decision-making trends for the same news topics and different sensitivity levels, and (iii) news topics significantly associated with investors’ responses differ according to the stock market and sensitivity. Journal: Journal of Behavioral Finance Pages: 398-410 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2021.1995735 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1995735 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:398-410 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2037600_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Eric Tham Author-X-Name-First: Eric Author-X-Name-Last: Tham Title: Ambiguous Text Abstract: Investors infer ambiguity from text in news and social media. A proxy for information ambiguity is developed from text processing and used in regression tests against the S&P 500 returns. A risk-neutral agent model with uniform prior beliefs is developed to explain the ambiguity premium or discount under unfavorable or favorable market conditions agnostic of the ambiguity preferences. The model postulates that the ambiguity premium is often elusive in efficient markets due to returns unpredictability, and the information ambiguity as an omitted variable bias in the fundamental relationship between risks and returns. Empirically, the author finds that news media drives equity prices more than social media except from June 2009 to November 2016. Journal: Journal of Behavioral Finance Pages: 466-478 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2022.2037600 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2037600 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:466-478 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2025595_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Jimmy Lockwood Author-X-Name-First: Jimmy Author-X-Name-Last: Lockwood Author-Name: Larry Lockwood Author-X-Name-First: Larry Author-X-Name-Last: Lockwood Author-Name: Hong Miao Author-X-Name-First: Hong Author-X-Name-Last: Miao Author-Name: Mohammad Riaz Uddin Author-X-Name-First: Mohammad Riaz Author-X-Name-Last: Uddin Author-Name: Keming Li Author-X-Name-First: Keming Author-X-Name-Last: Li Title: Does Analyst Optimism Fuel Stock Price Momentum? Abstract: Researchers have struggled to find rational risk factors that explain momentum profits derived from buying recent winners and shorting recent losers. Behavioral explanations have been offered that focus on the tendencies of investors to underreact to news and recommendations. Our study provides an alternative explanation centered on the behavior of sell-side analysts. We find a change in consensus recommendation from a hold to a buy is accompanied by an increase in momentum profits of 3.40% annually. Momentum profits fall, yet remain material, after the passage of Reg FD and the enactment of the Global Analyst Research Settlement. Our results support a behavioral explanation of investor cognitive biases fueled by analyst regency and optimism biases. Journal: Journal of Behavioral Finance Pages: 411-427 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2022.2025595 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2025595 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:411-427 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2037597_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Chih-Huei (Debby) Su Banks Author-X-Name-First: Chih-Huei (Debby) Su Author-X-Name-Last: Banks Title: Bank Monitoring Prevents Managerial Procrastination: Evidence from the Timing of Earnings Announcements Abstract: I examine the role of bank monitoring in the timing of earnings announcements. Managers have been shown to procrastinate and delay the public release of bad news on earnings. I find that banks discipline and prevent such managerial procrastination of earnings disclosures to the public. Moreover, I find that the market is more tolerant of delays in the public release of earnings information in the presence of a bank lending relationship. Thus, the negative abnormal return accompanying late releases of earnings information is observed only when a bank lending relationship is not present. Journal: Journal of Behavioral Finance Pages: 428-449 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2022.2037597 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2037597 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:428-449 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_1986715_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Konstantinos Gavriilidis Author-X-Name-First: Konstantinos Author-X-Name-Last: Gavriilidis Author-Name: Vasileios Kallinterakis Author-X-Name-First: Vasileios Author-X-Name-Last: Kallinterakis Title: Herding in Imperial Russia: Evidence from the St. Petersburg Stock Exchange (1865–1914) Abstract: We present seminal empirical evidence on market-wide herding from historical markets for the St. Petersburg stock exchange between 1865 and 1914. Our findings indicate the presence of herding in Imperial Russia’s largest equity market, which tends to vary among industries and grow stronger during months of negative performance and declining volatility. Controlling for the 1893-reform that prompted wider social participation in equity trading, we find that herding surfaces exclusively in the post-reform years, with no evidence of herding arising pre-reform. Our results showcase that the behavior of investors in historical stock exchanges exhibits patterns similar to those of modern-day ones. Journal: Journal of Behavioral Finance Pages: 383-397 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2021.1986715 File-URL: http://hdl.handle.net/10.1080/15427560.2021.1986715 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:383-397 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2037598_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Mobeen Ur Rehman Author-X-Name-First: Mobeen Author-X-Name-Last: Ur Rehman Author-Name: Ibrahim D. Raheem Author-X-Name-First: Ibrahim D. Author-X-Name-Last: Raheem Author-Name: Abdel Razzaq Al Rababa’a Author-X-Name-First: Abdel Razzaq Author-X-Name-Last: Al Rababa’a Author-Name: Nasir Ahmad Author-X-Name-First: Nasir Author-X-Name-Last: Ahmad Author-Name: Xuan Vinh Vo Author-X-Name-First: Xuan Vinh Author-X-Name-Last: Vo Title: Reassessing the Predictability of the Investor Sentiments on US Stocks: The Role of Uncertainty and Risks Abstract: We examine the predictive power of US investor sentiments on US sectoral returns and aggregated S&P 500 index in the presence of different risk and uncertainty indices. Investor sentiments are measured using the sentiment index proposed by Baker and Wurgler (2006). We also use bearish and bullish investor sentiment indices i.e., AAII sentiment indices, published by the American association of individual investors. We also use different risk and uncertainty indices i.e., economic policy uncertainty, financial uncertainty, geopolitical risk, and US equity market volatility. Results of the baseline model (i.e., the single model where the only predictor is sentiment index) show that the forecasting power of the predictor is weak. Augmenting the baseline model to account for uncertainty measures shows that the uncertainty's transmission impact is more accurate for out-of-sample forecasts than the single-factor model. We also highlight that the performance of the multi-factor predictive model incorporating USS B&W is superior to the benchmark model. Policy implications of the results are also discussed. Journal: Journal of Behavioral Finance Pages: 450-465 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2022.2037598 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2037598 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:450-465 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2037599_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Garima Goel Author-X-Name-First: Garima Author-X-Name-Last: Goel Author-Name: Saumya Ranjan Dash Author-X-Name-First: Saumya Ranjan Author-X-Name-Last: Dash Title: GREEDS and Stock Returns: Evidence from Global Stock Markets Abstract: This paper introduces GREEDS as a new measure of optimistic sentiment in the market. We measure the optimistic component of investor sentiment by constructing the Geographically Revealed Economic Expectations disclosed by Search (GREEDS) index from households’ search behavior on Google for a sample of 38 countries. Our results reveal that the GREEDS index positively correlates with global stock returns. We show the asymmetric effect of GREEDS, which is more prevalent in developed countries than emerging markets. Our findings also highlight the role of global sentiment in financial markets through the sentiment commonality effect. Journal: Journal of Behavioral Finance Pages: 479-494 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2022.2037599 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2037599 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:479-494 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2037601_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20230119T200553 git hash: 724830af20 Author-Name: Chia-Hsien Tang Author-X-Name-First: Chia-Hsien Author-X-Name-Last: Tang Author-Name: Yen-Hsien Lee Author-X-Name-First: Yen-Hsien Author-X-Name-Last: Lee Author-Name: Wan-Zhu Lu Author-X-Name-First: Wan-Zhu Author-X-Name-Last: Lu Author-Name: Li Wei Author-X-Name-First: Li Author-X-Name-Last: Wei Title: The Relationship between Analyst Coverage and Overinvestment, and the Mediating Role of Corporate Governance. Evidence From China Abstract: This study applied a quantile analysis to test the relationship between analyst coverage and overinvestment in Chinese firms and further sought to demonstrate the mediating effect of corporate governance on overinvestment. The empirical results show that analyst coverage causes overinvestment across all quantiles; however, corporate governance can diminish the effect of firm overinvestment in the higher quantile analysis. Additionally, the difference-in-differences method was used to explore the effectiveness of the Chinese government’s 2013 corporate governance reform, with the results confirming that that governance reform has been effective in inhibiting a firm’s overinvestment. The findings of this study indicate that analysts act as market supervisors in the Chinese capital market, improving corporate governance; however, their coverage does not appear to benefit firms or shareholders. This research highlights the need to review the role of analysts in the market to ensure they can reduce information asymmetry between managers and shareholders without causing overinvestment behavior. Journal: Journal of Behavioral Finance Pages: 495-510 Issue: 4 Volume: 24 Year: 2023 Month: 10 X-DOI: 10.1080/15427560.2022.2037601 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2037601 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:4:p:495-510 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100384_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Evangelos Vasileiou Author-X-Name-First: Evangelos Author-X-Name-Last: Vasileiou Author-Name: Polydoros Tzanakis Author-X-Name-First: Polydoros Author-X-Name-Last: Tzanakis Title: The Impact of Google Searches, Put-Call Ratio, and Trading Volume on Stock Performance Using Wavelet Coherence Analysis: The AMC Case Abstract: In 2021, meme stocks attracted the attention of investors and scholars. Using Wavelet Coherence analysis, we test the dynamic interdependence between the AMC Theaters stock performance and the explanatory factors of Google Trends index, Put-Call ratio, and Trading Volume for the period 2018-2021. Our empirical findings suggest that during 2018-2020 the examined variables do not have stable co-movements with the AMC returns, but in the growth year of 2021 the relationships amongst the variables are stable and statistically significant. Thus, wavelet analysis is a useful tool that shows dynamically the impact relationships between several factors and the stock prices. Particularly, in 2021 the skyrocketing increase of the AMC stock price caught the attention of market participants and the AMC returns lead the Google searches with an in-phase synchronization (positive correlation). Moreover, AMC returns lead the Put-Call ratio, which is a sentiment indication from the derivatives market, and the Trading Volume positively correlates with the stock returns reconfirming once again the theoretical price-volume relation. Journal: Journal of Behavioral Finance Pages: 111-119 Issue: 1 Volume: 25 Year: 2024 Month: 1 X-DOI: 10.1080/15427560.2022.2100384 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100384 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:111-119 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2085279_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Manapon Limkriangkrai Author-X-Name-First: Manapon Author-X-Name-Last: Limkriangkrai Author-Name: Robert B. Durand Author-X-Name-First: Robert B. Author-X-Name-Last: Durand Author-Name: Lucia Fung Author-X-Name-First: Lucia Author-X-Name-Last: Fung Title: Do Behavioral Biases Influence the Length of Sell-Side Analysts’ Observable Careers? Abstract: Analysts’ observable careers are short. Around half of the analysts we study have observable lives of approximately three years. Using the IBES database as a proxy for the length of analysts’ careers, we find that distraction and herding shorten observable lives. There are important roles for economically rational influences. The length of observable careers is reduced by inaccuracy in forecasting. Issuing a first forecast early but, on average, delaying forecasts for the portfolio of firms they cover also increase analysts’ life spans. We find no robust association between life span and optimism or overconfidence. Journal: Journal of Behavioral Finance Pages: 62-78 Issue: 1 Volume: 25 Year: 2024 Month: 1 X-DOI: 10.1080/15427560.2022.2085279 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2085279 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:62-78 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2053979_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Samer Adra Author-X-Name-First: Samer Author-X-Name-Last: Adra Author-Name: Elie Menassa Author-X-Name-First: Elie Author-X-Name-Last: Menassa Title: Central Bank Information Shocks, Value Gains, and Value Crashes Abstract: Monetary policy shocks that convey new macroeconomic information are significant predictors of both the absolute and risk-adjusted returns from value investing. Positive Fed information shocks lead to higher subsequent value returns. Crashes in the returns of value investing are most likely to occur in the aftermath of negative Fed information shocks. The effect of Fed information shocks on value returns and crashes is to a large extent driven by these shocks’ impact on informed trading. In practical terms, information shocks by the Fed are more impactful than conventional monetary shocks and should hence be more prioritized by value investors. Journal: Journal of Behavioral Finance Pages: 15-29 Issue: 1 Volume: 25 Year: 2024 Month: 1 X-DOI: 10.1080/15427560.2022.2053979 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2053979 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:15-29 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100380_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Tao Chen Author-X-Name-First: Tao Author-X-Name-Last: Chen Author-Name: Robert K. Larson Author-X-Name-First: Robert K. Author-X-Name-Last: Larson Author-Name: Han Mo Author-X-Name-First: Han Author-X-Name-Last: Mo Title: Investor Herding and Price Informativeness in Global Markets: Evidence from Earnings Announcements Abstract: The authors examine whether herd activity promotes the efficient pricing of value-relevant information conveyed by annual earnings announcements. Using a global panel sample representing 35 countries, they find that price informativeness increases with herding effects around the time of the earnings disclosure. In addition, the positive herding-informativeness relationship is greater in countries with stronger legal systems and stronger political regimes. A series of robustness tests confirm these relationships. The study findings demonstrate that the tendency to herd plays a beneficial role in expediting information dissemination and reducing trader disagreement. This implies that this positive association is probably driven by the presence of investigative herding. Journal: Journal of Behavioral Finance Pages: 92-110 Issue: 1 Volume: 25 Year: 2024 Month: 1 X-DOI: 10.1080/15427560.2022.2100380 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100380 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:92-110 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2085277_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Shuqin Liu Author-X-Name-First: Shuqin Author-X-Name-Last: Liu Author-Name: Diandian Ma Author-X-Name-First: Diandian Author-X-Name-Last: Ma Author-Name: Xuerong Li Author-X-Name-First: Xuerong Author-X-Name-Last: Li Author-Name: Xiuting Li Author-X-Name-First: Xiuting Author-X-Name-Last: Li Author-Name: Lijun Yin Author-X-Name-First: Lijun Author-X-Name-Last: Yin Title: The Value of “Brand” in the Chinese Stock Market: The Impact of Brand Attention on Stock Performance and the Moderation Role of Investor Sentiment Abstract: Using a database of more than 1.1 million comments from the largest Chinese stock discussion forum Eastmoney, we explore the value of “brand” in the Chinese stock market by empirically investigating the impact of brand attention on stock performance and the moderation role of investor sentiment, as well as the heterogeneity of these effects across companies with different brand values. It finds that brand attention has a positive impact on stock returns and stock trading volume. Investor sentiment has a positive impact on stock returns while having a negative impact on stock trading volume. Investor sentiment positively moderates the impact of brand attention on stock returns, but negatively moderates the impact of brand attention on stock trading volume. The impact of brand attention and investor sentiment on stock performance varies across companies with different brand values. It is more pronounced in companies with high brand value than in companies with a relatively low brand value, while the negative effect of investor sentiment on stock trading volume is lower in companies with high brand value, which highlights the importance of brand-building to improve stock performance. Journal: Journal of Behavioral Finance Pages: 46-61 Issue: 1 Volume: 25 Year: 2024 Month: 1 X-DOI: 10.1080/15427560.2022.2085277 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2085277 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:46-61 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2073592_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Ming-Che Hu Author-X-Name-First: Ming-Che Author-X-Name-Last: Hu Author-Name: Alex YiHou Huang Author-X-Name-First: Alex YiHou Author-X-Name-Last: Huang Author-Name: Dan-Liou Yu Author-X-Name-First: Dan-Liou Author-X-Name-Last: Yu Author-Name: Rui-Xiang Zhai Author-X-Name-First: Rui-Xiang Author-X-Name-Last: Zhai Title: A Behavior Perspective of Distress Anomaly: Evidence From Overnight Returns Abstract: Using measurement of overnight returns, this article documents that trading behaviors due to information shocks and investor sentiments contribute to distress anomaly. We find that stocks with the highest (lowest) overnight returns are accompanied with the greatest (smallest) distress risk premium, and accordingly, a conditional distress probability portfolio composed with double sort of overnight returns and distress probability would yield significant profitability. The regression outcomes demonstrate that probability of default significantly interacts with average overnight returns in explaining the future stock returns. The conventional distress anomaly is subsumed by the conditional distress factor, but not vice versa; and only profits of conventional distress-probability portfolios, not of the conditional portfolios, mainly come from stocks with characteristics that are associated with stock mispricing. The empirical results indicate that investors hold distressed stocks longer than expected because positive information shocks occur with high level of information supply and good information quality. Journal: Journal of Behavioral Finance Pages: 30-45 Issue: 1 Volume: 25 Year: 2024 Month: 1 X-DOI: 10.1080/15427560.2022.2073592 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2073592 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:30-45 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2073593_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Alexander Nepp Author-X-Name-First: Alexander Author-X-Name-Last: Nepp Author-Name: Fedor Karpeko Author-X-Name-First: Fedor Author-X-Name-Last: Karpeko Title: Hype as a Factor on the Global Market: The Case of Bitcoin Abstract: The impact of Bitcoin-related Google queries, Facebook likes, reposts and comments on Bitcoin price is analyzed with the help of ARDL and GARCH models. Our results have led us to the following conclusions. Firstly, a sharp increase in Bitcoin’s popularity or hype, which manifested itself through a rise in the number of Bitcoin-related Google queries, has resulted in an increase in Bitcoin price. This effect corresponds to the description of the ‘collective hysteria’ that spread in the online community and was triggered by the increasing volatility of the Bitcoin market. Secondly, we found that Bitcoin’s popularity among ordinary Internet users has a positive impact in low-volatile and highly volatile rising markets but a negative one in a highly volatile falling market. Thirdly, Bitcoin’s popularity among informed Internet users has a negative impact on Bitcoin price in a period of low volatility. Fourthly, uninformed users’ trust in Bitcoin has a positive influence on Bitcoin price in low-volatile and highly volatile falling markets. Finally, the main factors that shape the Bitcoin market are trust and popularity. Journal: Journal of Behavioral Finance Pages: 1-14 Issue: 1 Volume: 25 Year: 2024 Month: 1 X-DOI: 10.1080/15427560.2022.2073593 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2073593 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:1-14 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2085278_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Zhen Cao Author-X-Name-First: Zhen Author-X-Name-Last: Cao Author-Name: Surya Chelikani Author-X-Name-First: Surya Author-X-Name-Last: Chelikani Author-Name: Osman Kilic Author-X-Name-First: Osman Author-X-Name-Last: Kilic Author-Name: Xuewu (Wesley) Wang Author-X-Name-First: Xuewu (Wesley) Author-X-Name-Last: Wang Title: Implied Volatility Spread and Stock Mispricing Abstract: Stocks can be mispriced for at least two reasons: value-relevant information is not timely incorporated or investor sentiment can induce mispricing. Using the mispricing measure proposed by Stambaugh, Yu, and Yuan (2015), we show that informed trading in the options market, proxied by the implied volatility spread, can substantially alleviate stock mispricing. Higher implied volatility spread reliably predicts subsequently lower stock mispricing after controlling for an array of economic variables including firm size, illiquidity, idiosyncratic volatility, institutional ownership, and investor’s divergence of opinions. In addition, this effect is more pronounced when the options trading volume is higher, consistent with the notion that higher options trading volume provides better camouflage for informed trading in the spirit of Kyle (1985). Our findings highlight the importance of information incorporation to reduce asset mispricing. We further show that a self-financing monthly portfolio that goes long on most underpriced stocks and short on most overpriced stocks when the implied volatility spread is the lowest yields statistically and economically significant abnormal returns. Journal: Journal of Behavioral Finance Pages: 79-91 Issue: 1 Volume: 25 Year: 2024 Month: 1 X-DOI: 10.1080/15427560.2022.2085278 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2085278 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:1:p:79-91 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100378_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Lan Thi Mai Nguyen Author-X-Name-First: Lan Thi Mai Author-X-Name-Last: Nguyen Author-Name: Jun Myung Song Author-X-Name-First: Jun Myung Author-X-Name-Last: Song Title: Media Sentiment and Institutional Ownership Abstract: This paper examines whether institutional investors invest less into overvalued firms due to their informational advantage. Considering high media sentiment as a source of overvaluation, we show that institutional investors tend to hold fewer stocks of firms that receive high media sentiment. The size of the overvaluation is empirically shown as a channel through which media sentiment influences the ownership structure in firms. We conclude this paper by showing institutional investors do not view high media sentiment as a chance to withdraw their money from firms with poor corporate governance structure that the institutional investors cannot exert much influence on. Instead, institutional investors tend not to invest in these firms from the start. Journal: Journal of Behavioral Finance Pages: 134-150 Issue: 2 Volume: 25 Year: 2024 Month: 4 X-DOI: 10.1080/15427560.2022.2100378 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100378 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:134-150 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100381_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Qiuye Cai Author-X-Name-First: Qiuye Author-X-Name-Last: Cai Author-Name: Kenneth Yung Author-X-Name-First: Kenneth Author-X-Name-Last: Yung Title: Sentiment, Attention, and Earnings Pricing Abstract: We find that investor sentiment restrains the predictability of earnings news on announcement returns but the constraining effect of sentiment on the predictive power of earnings news diminishes as sentiment falls. We document that investor attention works as an important channel in the relation between investor sentiment and announcement returns. Investor attention enhances the immediate price reaction to earnings news by curbing the impact of sentiment on the predictive power of earnings news. Our findings reflect the joint effect of attention and sentiment on the source of excess returns documented in the prior earnings-based market anomaly literature. Journal: Journal of Behavioral Finance Pages: 121-133 Issue: 2 Volume: 25 Year: 2024 Month: 4 X-DOI: 10.1080/15427560.2022.2100381 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100381 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:121-133 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100382_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Paul J. M. Klumpes Author-X-Name-First: Paul J. M. Author-X-Name-Last: Klumpes Title: The Sustainability of Investment Decision Making Abstract: This paper develops and tests a new multi-attribute, behavioral based measure of mutual fund performance, based at the portfolio decision-making rather than trade level, using the alpha score, hit rate and the win-loss ratio. These measures are then combined to develop a multi-attribute measure of “efficiency”; the author decomposes this into technical, scale, and mix efficiency scores and then separately measure this for overweight and underweight portfolio positions. The author finds that the variations in average technical and mix efficiency scores related to win-loss ratios (hit rates) for relatively overweight (underweight) positions are statistically significant. These findings suggest that the sustainability of investment performance is evidenced from win-to-loss ratios and hit rate in ways that are not exhibited by the alpha performance measure. Journal: Journal of Behavioral Finance Pages: 181-193 Issue: 2 Volume: 25 Year: 2024 Month: 4 X-DOI: 10.1080/15427560.2022.2100382 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100382 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:181-193 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100386_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Miha Kebe Author-X-Name-First: Miha Author-X-Name-Last: Kebe Author-Name: Matthias Uhl Author-X-Name-First: Matthias Author-X-Name-Last: Uhl Title: High-Frequency Effects of Novel News on the EURUSD Exchange Rate Abstract: We study the intraday relationship between novel Euro-specific news and the EURUSD exchange rate with over 100 million news articles with millisecond precision. We show a predictive but not contemporaneous relationship between these news and their sentiment and EURUSD returns. This lends support to the slow information diffusion hypothesis as well as rational inattention to new news theories. Furthermore, we identify a regime change in the relationship between news and the EURUSD returns since the Global Financial Crisis (GFC). The positive relationship observed since the GFC between news sentiment and the EURUSD was particularly prominent during the Eurozone debt crisis. Journal: Journal of Behavioral Finance Pages: 194-207 Issue: 2 Volume: 25 Year: 2024 Month: 4 X-DOI: 10.1080/15427560.2022.2100386 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100386 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:194-207 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100383_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Sandra Ferreruela Author-X-Name-First: Sandra Author-X-Name-Last: Ferreruela Author-Name: Vasileios Kallinterakis Author-X-Name-First: Vasileios Author-X-Name-Last: Kallinterakis Author-Name: Tania Mallor Author-X-Name-First: Tania Author-X-Name-Last: Mallor Title: Cross-Market Herding: Do ‘Herds’ Herd with Each Other? Abstract: Although herding constitutes one of the most widely researched behavioral trading patterns internationally, the possibility of cross-market herding has remained largely underexplored in the literature. Our study provides a detailed empirical investigation of this issue in the context of ten Asia-Pacific markets for the February 1995–March 2022 window. We find that all ten markets’ “herds” project significant relationships with each other, with causality being identified within a minority of those relationships. These results are robust when controlling for financial crises (Asian; global financial; global pandemic) and US market returns. Journal: Journal of Behavioral Finance Pages: 208-228 Issue: 2 Volume: 25 Year: 2024 Month: 4 X-DOI: 10.1080/15427560.2022.2100383 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100383 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:208-228 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100387_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Frank J. Fabozzi Author-X-Name-First: Frank J. Author-X-Name-Last: Fabozzi Author-Name: K. C. Chen Author-X-Name-First: K. C. Author-X-Name-Last: Chen Author-Name: K. C. Ma Author-X-Name-First: K. C. Author-X-Name-Last: Ma Author-Name: Ramesh Rao Author-X-Name-First: Ramesh Author-X-Name-Last: Rao Title: Those Who Learn from History Are Doomed to Repeat It Abstract: We see the stock market constantly responding to changing signals. These inputs are perceived to be highly structured in both space and time. Such regularities in the environment allow expectations about the future to be formed, facilitating current investment decisions. Perceiving the continuous stability is exploited by the brain, creating a bias in perception to generate serial dependence. Therefore, stock price dependence may be simply a result of the behavioral dependence in the decision process. The empirical evidence presented in this paper confirms that the dependence in every facet of an investment decision process has contributed to the observed stock price dependence. The largest contributor is by far from investors’ memory dependence, exceeding 80%. If history is the record of past decisions going through the brain’s neural pathways, the memory dependence or “memory of the memory” occurs when people follow the same old neural pathway over time. As paying attention to history is an obvious mental visit to the memory neural pathways, those who study the history are doomed to repeat it. Journal: Journal of Behavioral Finance Pages: 151-166 Issue: 2 Volume: 25 Year: 2024 Month: 4 X-DOI: 10.1080/15427560.2022.2100387 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100387 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:151-166 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100377_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Naveh Eskinazi Author-X-Name-First: Naveh Author-X-Name-Last: Eskinazi Author-Name: Miki Malul Author-X-Name-First: Miki Author-X-Name-Last: Malul Author-Name: Mosi Rosenboim Author-X-Name-First: Mosi Author-X-Name-Last: Rosenboim Author-Name: Tal Shavit Author-X-Name-First: Tal Author-X-Name-Last: Shavit Title: An Experimental Study of the Effect of the Anchor of the Option's Underlying Asset on Investors’ Pricing Decisions Abstract: The current study tests experimentally whether decision makers' options pricing is biased by the magnitude of the option's underlying asset outcomes in what is called an anchor effect. We recruited 1,023 participants through Amazon’s Mechanical Turk platform (MTurk) and assigned them randomly to eight groups that differed by type of asset and pricing position (buy or sell). Participants were asked to price a lottery, meaning, the option, whose outcomes are derived from an underlying lottery with a high, low or non-numerical possible outcome. The results indicate that the underlying asset's magnitude (low or high) creates an anchor that affects the option’s pricing. However, the option's pricing is not affected by framing it as a derivative lottery. To the best of our knowledge, this is the first study that examines whether the underlying asset creates an anchor that affects an option’s pricing. Journal: Journal of Behavioral Finance Pages: 167-180 Issue: 2 Volume: 25 Year: 2024 Month: 4 X-DOI: 10.1080/15427560.2022.2100377 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100377 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:167-180 Template-Type: ReDIF-Article 1.0 # input file: HBHF_A_2100379_J.xml processed with: repec_from_jats12.xsl darts-xml-transformations-20240209T083504 git hash: db97ba8e3a Author-Name: Soumaya Yaakoubi Author-X-Name-First: Soumaya Author-X-Name-Last: Yaakoubi Title: Investor Sentiment and Market-Wide Liquidity Pricing Abstract: The recent asset pricing evidence on the return-liquidity risk relationship is mixed and somewhat ambiguous. We reevaluate the importance of market-wide liquidity and liquidity risk for equity pricing by taking the role of investor sentiment into account. Regarding the market-wide liquidity level as a systematic factor, we find that high market sentiment tends to weaken the effect of market-wide illiquidity - both expected and unexpected - on stocks returns. With respect to systematic liquidity exposure as a priced risk factor, the results show that the effect of exposure to shocks in aggregate liquidity on expected returns is significantly positive when sentiment is low, while it is significantly negative when sentiment is high suggesting that “rational” asset pricing is only valid in the low sentiment regime without too much turbulence caused by sentiment traders. Journal: Journal of Behavioral Finance Pages: 229-243 Issue: 2 Volume: 25 Year: 2024 Month: 4 X-DOI: 10.1080/15427560.2022.2100379 File-URL: http://hdl.handle.net/10.1080/15427560.2022.2100379 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:taf:hbhfxx:v:25:y:2024:i:2:p:229-243