Three Essays On Investor Confidence
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Three Essays On Investor Confidence
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Author : Christoph Meier
language : en
Publisher:
Release Date : 2017
Three Essays On Investor Confidence written by Christoph Meier and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Investmensts categories.
This PhD research is committed to contributing to the literature on investor overconfidence, one of the most robust findings in the field of behavioural finance. Overconfidence, a cognitive bias where decision makers tend to be overly optimistic not only about their aptitudes and skills, but also about the precision of their forecasts and information, is associated with poor decision making. Individuals suffering from overconfidence tend to be excessive stock traders, Chief Executive Officers (CEOs) who rush into mergers and acquisitions, risky drivers, naïve entrepreneurs and sloppy retirement planners. The literature yields the many attempts to link stock market phenomena to overconfidence. However, existing measures that have been used to test these hypotheses are typically only loosely related to the overconfidence of investors in their own abilities, or use proxies that lack a formal model of cognitive psychology. In the first of three research projects, I propose a measure of aggregate investor confidence that is based on a cross-disciplinary model containing determinants of confidence. The measure captures major economic events intuitively, and is statistically distinct from exiting proxies. Using a 1926-2011United States (US) sample, I find that the new measure is a better predictor of aggregate trading activity than past stock returns, which have been used in prior studies.The second research project explores the role of aggregate investor confidence in asset pricing factors. Empirical tests reveal interesting patterns. Firstly, and in line with a behavioural model by Daniel, Hirshleifer, and Subrahmanyam (1998), aggregate investor confidence partially explains variations in the profitability of momentum strategies. Additionally, aggregate investor confidence appears to play a key role in the size factor, complementing an early hypothesis by Roll (1981). Indeed, investors seem to systematically change their risk perceptions which ultimately impacts on market outcome. The third research project takes a qualitative stance. Using a new methodology proposed by Glaser, Langer, and Weber (2013), we utilise the ability to assess time series variations of individual overconfidence levels in an experimental asset market. We find that arriving signals that strongly support prior decisions cause overconfidence to prevail, while strongly opposing signals cause the effect to vanish 'overconfidence crashes'. However, previously lost overconfidence can re-emerge when these opposing signals reverse .Additionally, we find strong evidence in favour of the hypothesis by Hongaund Stein (2007) which states that investors interpret arriving information differently with opposing feedback having particularly strong effects. We also find measurement bias in the methodology proposed by Glaser et al. (2013). This is consistent with methodological concerns documented by Langnickeland Zeisberger (2016) and Biais, Hilton, Mazurier, and Pouget (2005) who report that assessment tasks using confidence intervals typically yield inflated overconfidence scores, as individuals tend to be insensitive to confidence levels in their estimations.
Three Essays On Information Volatility And Crises In Equity Markets
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Author : Shane K. Clark
language : en
Publisher:
Release Date : 2015
Three Essays On Information Volatility And Crises In Equity Markets written by Shane K. Clark and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
Essay 3 investigates the relation between proxies for investor sentiment and stock market crises and recoveries on international indices. Using an Early-Warning-System (EWS) model, the essay examines whether investor sentiment is a useful predictor for the occurrence of stock market crises and early signs of recovery. Three alternative proxies are used to measure investor sentiment, including previously cited measures of stock market riskiness, investors' risk aversion and investors' optimism about stock markets. The results show that investor sentiment is overall a significant predictor of the occurrence of crises within a one year period, and that the addition of sentiment into early warning signal models of stock market crises can improve the predictive performance of the model (increases in investor sentiment increase the probability of occurrence of a crisis, which is in line with previous contributions finding a negative lead-lag relation between sentiment and stock returns). The extension of the model to early signs of recoveries also shows that sentiment is a reliable predictor. The measure of stock market riskiness (Baker and Wurgler, 2006) is found to be a better predictor than the Volatility Index (VIX) and the Put-to-Call Ratio (PCR). The cross-country comparison results confirms the literature findings that the link between sentiment and stock market returns varies across indices and cultures, as the predictive power of the variable appears strongest in the French and U.S. indices.
Three Essays On Investment And Growth
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Author :
language : en
Publisher:
Release Date : 2017
Three Essays On Investment And Growth written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Three Essays On Institutional Investors
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Author : Ligang Zhong
language : en
Publisher:
Release Date : 2012
Three Essays On Institutional Investors written by Ligang Zhong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
In this dissertation, I investigate the impact of institutional investors on security prices and corporate policies, and offer a new perspective on the vital role that institutional investors play in the modern capital market. Specifically, on the impact on security price movements, I design a new measure of stock-level sentiment based on mutual fund publically disclosed portfolio information and provide a new dimension to better predict stock returns. A trading strategy based on the new sentiment metrics can generate an annualized alpha of 21.27%. The abnormal returns cannot be explained by the time-varying expected returns and transaction costs, and can be best explained by mutual fund overreactions. Hence, my findings can be interpreted as a new anomaly in a new era-when institutional investors are the marginal traders. On the impact on corporate policy side, I document two pieces of new empirical evidence on the importance of long-term institutional holdings: the entrenchment effect of long-term institutional holdings in the context of corporate financing decisions and the active monitoring role of long-term institutional investors in the context of international firms' accounting qualities. Combined with previous studies which favour a long-term institutional investor, the evidence on the cost side of long-term holding I document here can serve as the first call for an optimal investment horizon for firms operating in the U.S.
Three Essays On Mutual Funds Fund Management Skills And Investor Sentiment
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Author : Feng Dong
language : en
Publisher:
Release Date : 2017
Three Essays On Mutual Funds Fund Management Skills And Investor Sentiment written by Feng Dong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Chief executive officers categories.
Three Essays In Investments
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Author : Luqi Xu
language : en
Publisher:
Release Date : 2021
Three Essays In Investments written by Luqi Xu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Electronic dissertations categories.
Sentiment is an important concept in economics and finance and has been the focus of many studies. Individual investors, professional investors, corporate managers, and households have sentiments on the economy and financial markets which affect their decisions, and hence economic activities and asset prices. Measuring sentiment and determining what factors affect it have significant importance in finance research. My dissertation studies this subject by introducing state-of-the-art methods from artificial intelligence to measure the sentiment in several sources of business text data, that is, public firms disclosures and mutual funds reports. I investigate the information content, determinants, and the effects of the sentiments on asset prices and investment decisions of investors. In chapter one, we use a novel text classification approach from deep learning to accurately measure sentiment in a large sample of 10-Ks. In contrast to prior literature, we find that both positive and negative sentiments predict abnormal returns and abnormal trading volume around the 10-K filing date and future firm fundamentals and policies. Our results suggest that the qualitative information contained in corporate annual reports is richer than previously found. In chapter two, I study the sentiment of mutual fund managers towards the stock market. Using a direct measure of managers market expectations extracted from mutual funds semi-annual reports, I find that fund managers extrapolate their funds past performance into their market outlook. Funds with managers who have higher market expectation take more risk by increasing their equity holdings and the beta of their equity portfolios, but underperform subsequently. In chapter three, we study the sentiment of mutual fund managers about specific stocks in their portfolios. We study some mutual funds practice of voluntarily disclosing investment ideas in their annual reports. The practice involves, at a minimum, expressing views on stocks which fund managers are optimistic about. We find that managers of larger and better performing funds discuss positions that have recently underperformed, those that make up larger portions of their portfolios, and those they have held for longer periods. Our findings suggest that managers disclose these recommendations to boost their own fund performance and to attract additional capital.
Three Essays On Investment
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Author : Roumeen Islam
language : en
Publisher:
Release Date : 1990
Three Essays On Investment written by Roumeen Islam and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990 with categories.
Three Essays In Behavioural Finance
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Author : Contantinos Antoniou
language : en
Publisher:
Release Date : 2010
Three Essays In Behavioural Finance written by Contantinos Antoniou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with Finance categories.
Abstract: Behavioural Finance relaxes the neoclassical assumption that investors consistently apply Bayes Rule when updating their expectations, and identifies the behavioural attributes that affect asset prices. This thesis extends this literature by examining deviations from the Bayesian model that arise due to i) ambiguity aversion, ii) investor sentiment and iii) decision heuristics. Bayesian Updating assumes that investors are able to always estimate a single generating process for expected returns. However, in reality investors analyze noisy information signals that relate to this unknown distribution in a latent way, and it is likely that they are not always able to determine a single probability distribution. Behavioural economists have shown that in such conditions of uncertainty about probabilities people become pessimistic. The first chapter examines whether the pricing of analyst earnings is affected by ambiguity aversion, offering confirmatory evidence. A behavioural literature shows that people in good sentiment make optimistic choices, relative to objective probabilities. The second chapter examines whether investor sentiment affects the performance of the momentum trading strategy, an anomaly related to the pricing of good and bad information. The results indicate that sentiment strongly affects the momentum phenomenon, suggesting that it is triggered from investors' behavioural biases. It has been suggested that deviations from Bayesian Updating arise due to heuristics triggered by the characteristics of the information used. The last chapter examines the validity of one such important hypothesis proposed by Griffin and Tversky (1992) using rigorous experimental economics techniques. The results confirm this hypothesis, indicating that investors are likely to overreact to salient information signals with low predictive validity.
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Author :
language : en
Publisher:
Release Date : 1976
written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1976 with categories.
Three Essays On Investor Heterogeneous Beliefs
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Author : Yi Zhang
language : en
Publisher:
Release Date : 2008
Three Essays On Investor Heterogeneous Beliefs written by Yi Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Stockholders categories.