{"title":"Extrapolative beliefs and return predictability: Evidence from China","authors":"","doi":"10.1016/j.jbef.2024.100957","DOIUrl":null,"url":null,"abstract":"<div><p>We explore the role of extrapolative beliefs in return predictability in the Chinese stock market. Extrapolation-based theories suggest that the return predictability arises from the eventual correction of mispricing caused by extrapolators, particularly during periods of high extrapolative beliefs. Our findings support this notion, indicating that greater extrapolative beliefs strengthen the return predictability of valuation ratios. Mechanism analyses reveal that extrapolative beliefs influence the mean-reversion and investor sentiment.</p></div>","PeriodicalId":47026,"journal":{"name":"Journal of Behavioral and Experimental Finance","volume":null,"pages":null},"PeriodicalIF":4.3000,"publicationDate":"2024-07-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Behavioral and Experimental Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S2214635024000728","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We explore the role of extrapolative beliefs in return predictability in the Chinese stock market. Extrapolation-based theories suggest that the return predictability arises from the eventual correction of mispricing caused by extrapolators, particularly during periods of high extrapolative beliefs. Our findings support this notion, indicating that greater extrapolative beliefs strengthen the return predictability of valuation ratios. Mechanism analyses reveal that extrapolative beliefs influence the mean-reversion and investor sentiment.
期刊介绍：
Behavioral and Experimental Finance represent lenses and approaches through which we can view financial decision-making. The aim of the journal is to publish high quality research in all fields of finance, where such research is carried out with a behavioral perspective and / or is carried out via experimental methods. It is open to but not limited to papers which cover investigations of biases, the role of various neurological markers in financial decision making, national and organizational culture as it impacts financial decision making, sentiment and asset pricing, the design and implementation of experiments to investigate financial decision making and trading, methodological experiments, and natural experiments.
Journal of Behavioral and Experimental Finance welcomes full-length and short letter papers in the area of behavioral finance and experimental finance. The focus is on rapid dissemination of high-impact research in these areas.
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