Journal of Behavioral and Experimental Finance最新文献

The aim of this paper is to analyse the official corporate reports of selected companies in the utilities and energy sectors to determine whether they report transparently on negative biodiversity-related events or instead present an idealised image through impression management strategies. For this purpose, through a counter-accounting approach, external sources were consulted to find information on incidents with an impact on biodiversity for selected companies from the energy and utilities sectors. 47 incidents linked to 17 companies were identified and the information obtained from the unofficial sources was then compared with what the companies had disclosed in their sustainability reports. Half of the incidents identified were not disclosed at all and those that were informed were, in most cases, partially reported using impression management mechanisms.

Personal experiences can impact investors’ risk taking, and this can explain market phenomena such as time-varying risk premia, asset price bubbles or wage–price spirals. Establishing the link from individual experiences to market outcomes is challenging, as together with experiences, several decision-relevant factors simultaneously change. The present work investigates the impact of prior experiences on subsequent investments in a laboratory experiment without confounds, which allows for the control of various factors that usually are correlated with experience. The results show that high (low) previously experienced outcomes lead to more (less) investment in a risky asset, even in a condition where experiences do not provide new information and should be ignored. A reinforcement learning model captures the observed individual behavior and allows us to explain market price dynamics. The experience effect on risk taking informs behavioral theories of markets and provides a cognitive explanation for trend-following and self-enforcing market dynamics.

Around the world, it is becoming increasingly common for individuals to have volatile incomes. Previous research offers mixed evidence on whether uncertainty about one’s income may increase or decrease saving behaviour. Across four incentivised online experiments (N = 712), we examine the relationship between income volatility and saving behaviour in a novel financial decision making task. In this task, participants receive hypothetical income that is either consistent or that varies to different degrees. We capture participants’ perceptions of how volatile their income is and observe how this influences their decision to spend the income or save it towards a hypothetical impending emergency. Our results indicate that receiving a more volatile income, as measured by its coefficient of variation (CV), leads to higher savings within our task. However, there appears to be a threshold level of volatility that must be exceeded before participants save differently relative to receiving a stable income.

This paper studies the effect of judicial reform on corporate cash holdings. Leveraging the establishment of Circuit Courts in China as an exogenous shock, we demonstrate that firms reduce cash holdings by 10.4% when under the jurisdiction of a court. The two primary channels through which the courts affect cash holdings are the availability of cheaper external financing and lower litigation uncertainty. This effect is more pronounced in financially constrained, private, and non-politically connected firms. Moreover, the equivalent perceived value of one additional CNY of cash held by firms declines by ￥0.091 due to lower precautionary motives. Further analysis shows that firms are more likely to pursue returns from alternative strategies by investing more, raising more capital, and buying back more shares. Collectively, these results suggest that judicial independence can have potentially important consequences for corporate cash management strategies.

During the COVID-19 pandemic, governments implemented various measures to control the spread of the virus, enhance healthcare systems, and mitigate the economic impact of these actions. In this study, we investigate how government responses to COVID-19, in terms of stringency and economic support, affected individuals' financial worries in 88 economies. We also investigate how the relationship between these variables was affected by the public’s confidence in the government. Our results suggest that greater stringency was associated with increased financial worry, irrespective of public trust in the government. Meanwhile, the impact of economic support policies varied with the level of public trust in the government. In countries where citizens reported high levels of confidence in their government, economic support to households helped to alleviate financial worry. In countries with low confidence levels, the support policies had no statistically significant impact.

We find that firm coverage on the popular Mad Money Show is significantly associated with institutional and retail investor active attention, proxied by SEC EDGAR queries and posts on StockTwits. The association strengths differ by recommendation directions (buy or sell) and a firm’s exposure on the Show. The associations remain after controlling for selection bias, other firm-specific news, and moderating events (e.g., Superbowl and Olympics). The increased investor active attention is associated subsequently with abnormal trading volumes and short-sales activities of institutional/retail investors, and retail investor portfolios. While the opening price captures most of the significant association between Show coverage and next day’s returns, the extent of subsequent reversals varies by Show segment, recommendation direction and moderators (e.g., firm-coverage frequency on the same Show). No abnormal returns are associated with any pre-Show publicity about upcoming guest interviews. Our findings are consistent with the association of the media and its potential influencers with the limited active attention budgets of investors, different behaviors of retail and institutional investors, and the shorting of contrarian investors.

Information ignorance refers to the act of deliberately avoiding, neglecting, or distorting information to uphold a positive self-image and protect our identity-based beliefs. We apply this framework to household finance and develop a concise 12-item questionnaire measuring individuals’ receptiveness to financial information, or the lack thereof – the Financial Homo Ignorans (FHI) Scale. We conduct two studies with samples from the general population in Sweden (total N=2508) and show that the FHI scale has high reliability and distinct from other commonly used individual-difference measures in behavioral finance. We show that individual heterogeneity as assessed by the FHI scale explains a substantial variation in financial behaviors and financial well-being, also when controlling for demographics and financial literacy. These results unequivocally demonstrate the utility of the FHI scale as a valuable instrument for researchers and practitioners in comprehending and addressing the challenges posed by the omnipresence of financial information in today's world.

In light of the exponential growth in sports betting since 2018, a deeper understanding of the prevalence and nuances of corruption is needed. We demonstrate that in the venues and leagues where the likelihood of game fixing is high (among home teams and in NCAA basketball) point shaving markers are more pronounced, and where it is low (among visiting teams and in NCAA football) such indicators are muted. We explore this suspicious pattern via a natural experiment designed to exploit a positive exogenous shock in media scrutiny. Employing an exceptionally deep and broad dataset we show that corruption markers do not attenuate under social pressure and provide robust evidence that innocuous behaviors explain suspect game and wager outcomes. Our study establishes that a high degree of competitive integrity exists in the NCAA, NBA, and NFL.

Most research documenting correlation between behavioral biases use survey or experimental data, often focusing on related biases. We test whether evidence of loss aversion in housing sales prices is stronger among individuals who exhibited focal point tendencies when selecting their mortgage amount at purchase, allowing for market impacts of both behavioral biases in high-stakes contexts. We find a strong positive relationship between the effects of facing a loss on eventual sales prices and whether sellers selected a round mortgage amount during their initial purchase. Further, we show that selecting round mortgage amounts is persistent within borrowers over time.

Prospect Theory suggests that when the pre-offer market price is below the historical purchase price, target shareholders may be reluctant to accept a merger offer, because it requires realizing nominal losses. In a sample of all U.S. public firm merger offers in 1990–2019, we find that the acquirer partially compensates target shareholders, including retail investors, for their losses via a higher offer premium. Consistent with Prospect Theory, the marginal compensation decreases with loss size and is higher in cash-only deals. We also show that the extra premium paid hurts (boosts) acquirer (target) shareholders' wealth.