Pub Date : 2022-04-07DOI: 10.1080/15427560.2022.2055032
J. Aimone, Xiaofei Pan
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.
{"title":"My Risk, Your Risk, and Our Risk: Costly Deviation in Delegated Risk-Taking Environments","authors":"J. Aimone, Xiaofei Pan","doi":"10.1080/15427560.2022.2055032","DOIUrl":"https://doi.org/10.1080/15427560.2022.2055032","url":null,"abstract":"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.","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"290 1","pages":"371 - 387"},"PeriodicalIF":1.9,"publicationDate":"2022-04-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83436224","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-30DOI: 10.1080/15427560.2022.2053979
Samer Adra, Elie Menassa
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.
{"title":"Central Bank Information Shocks, Value Gains, and Value Crashes","authors":"Samer Adra, Elie Menassa","doi":"10.1080/15427560.2022.2053979","DOIUrl":"https://doi.org/10.1080/15427560.2022.2053979","url":null,"abstract":"<p><b>Abstract</b></p><p>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.</p>","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"8 3","pages":""},"PeriodicalIF":1.9,"publicationDate":"2022-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138508999","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-16DOI: 10.1080/15427560.2022.2047684
Qingzhong Ma, David A. Whidbee, Wei Athena Zhang
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.
{"title":"Behavioral Biases and the Asset Growth Anomaly","authors":"Qingzhong Ma, David A. Whidbee, Wei Athena Zhang","doi":"10.1080/15427560.2022.2047684","DOIUrl":"https://doi.org/10.1080/15427560.2022.2047684","url":null,"abstract":"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.","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"44 1","pages":"511 - 529"},"PeriodicalIF":1.9,"publicationDate":"2022-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76170844","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-01DOI: 10.1080/15427560.2022.2037600
Eric Tham
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-ne...
{"title":"Ambiguous Text","authors":"Eric Tham","doi":"10.1080/15427560.2022.2037600","DOIUrl":"https://doi.org/10.1080/15427560.2022.2037600","url":null,"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-ne...","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"27 5","pages":""},"PeriodicalIF":1.9,"publicationDate":"2022-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138508984","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-02-16DOI: 10.1080/15427560.2022.2037598
Mobeen Ur Rehman, I. Raheem, Abdel Razzaq Al Rababa'a, Nasir Ahmad, X. Vo
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.
{"title":"Reassessing the Predictability of the Investor Sentiments on US Stocks: The Role of Uncertainty and Risks","authors":"Mobeen Ur Rehman, I. Raheem, Abdel Razzaq Al Rababa'a, Nasir Ahmad, X. Vo","doi":"10.1080/15427560.2022.2037598","DOIUrl":"https://doi.org/10.1080/15427560.2022.2037598","url":null,"abstract":"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.","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"52 1","pages":"450 - 465"},"PeriodicalIF":1.9,"publicationDate":"2022-02-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76916591","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-02-12DOI: 10.1080/15427560.2022.2037601
Chia-Hsien Tang, Yen‐Hsien Lee, Wanying Lu, Li Wei
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.
{"title":"The Relationship between Analyst Coverage and Overinvestment, and the Mediating Role of Corporate Governance. Evidence From China","authors":"Chia-Hsien Tang, Yen‐Hsien Lee, Wanying Lu, Li Wei","doi":"10.1080/15427560.2022.2037601","DOIUrl":"https://doi.org/10.1080/15427560.2022.2037601","url":null,"abstract":"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.","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"34 1","pages":"495 - 510"},"PeriodicalIF":1.9,"publicationDate":"2022-02-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87965560","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-02-10DOI: 10.1080/15427560.2022.2037599
Garima Goel, S. Dash
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.
{"title":"GREEDS and Stock Returns: Evidence from Global Stock Markets","authors":"Garima Goel, S. Dash","doi":"10.1080/15427560.2022.2037599","DOIUrl":"https://doi.org/10.1080/15427560.2022.2037599","url":null,"abstract":"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.","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"2017 1","pages":"479 - 494"},"PeriodicalIF":1.9,"publicationDate":"2022-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88907016","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-01-13DOI: 10.1080/15427560.2022.2025595
Jimmy Lockwood, L. Lockwood, Hong Miao, Mohammad Riaz Uddin, Keming Li
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.
研究人员一直在努力寻找理性的风险因素，以解释买进近期赢家、做空近期输家所产生的动量利润。行为解释侧重于投资者对新闻和推荐反应不足的倾向。我们的研究提供了另一种以卖方分析师行为为中心的解释。我们发现，从持有到买入的一致建议变化伴随着每年3.40%的动量利润增长。在Reg FD和Global Analyst Research Settlement通过后，动量利润下降，但仍然很可观。我们的研究结果支持了投资者认知偏差的行为解释，这种认知偏差是由分析师的冲动和乐观偏见推动的。
{"title":"Does Analyst Optimism Fuel Stock Price Momentum?","authors":"Jimmy Lockwood, L. Lockwood, Hong Miao, Mohammad Riaz Uddin, Keming Li","doi":"10.1080/15427560.2022.2025595","DOIUrl":"https://doi.org/10.1080/15427560.2022.2025595","url":null,"abstract":"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.","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"1 1","pages":"411 - 427"},"PeriodicalIF":1.9,"publicationDate":"2022-01-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86790673","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-28DOI: 10.1080/15427560.2021.1995735
J. Han, Hyun-jung Kim
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.
{"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","authors":"J. Han, Hyun-jung Kim","doi":"10.1080/15427560.2021.1995735","DOIUrl":"https://doi.org/10.1080/15427560.2021.1995735","url":null,"abstract":"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.","PeriodicalId":47016,"journal":{"name":"Journal of Behavioral Finance","volume":"160 1","pages":"398 - 410"},"PeriodicalIF":1.9,"publicationDate":"2021-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86223497","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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