On the Verges of Overconfidence

2015 ◽  
Vol 29 (4) ◽  
pp. 3-8 ◽  
Author(s):  
Ulrike Malmendier ◽  
Timothy Taylor
Keyword(s):  
Public Policy ◽  
Stock Market ◽  
Capital Structure ◽  
Trading Volume ◽  
Market Returns ◽  
Empirical Measures ◽  
Stock Market Returns ◽  
Managerial Overconfidence ◽  
Rule Out

This symposium provides several examples of overconfidence in certain economic contexts. Michael Grubb looks at “Overconfident Consumers in the Marketplace.” Ulrike Malmendier and Geoffrey Tate consider “Behavioral CEOs: The Role of Managerial Overconfidence.” Kent Daniel and David Hirshleifer discuss “Overconfident Investors, Predictable Returns, and Excessive Trading.” A number of insights and lessons emerge for our understanding of markets, public policy, and welfare. How do firms take advantage of consumer overconfidence? Might government attempts to rule out such practices end up providing benefits to some consumers but imposing costs on others? How are empirical measures of CEO overconfidence related to investment and the capital structure of firms? Can overconfidence among at least some investors help to explain prominent anomalies in stock markets like high levels of trading volume and certain predictable patterns in stock market returns?

Relationship Between FIIs’ Herding and Returns in the Indian Equity Market: Further Empirical Evidence

2019 ◽  
pp. 097215091984522
Author(s):  
Kapil Choudhary ◽  
Parminder Singh ◽  
Amit Soni
Keyword(s):  
Stock Market ◽  
Empirical Evidence ◽  
Trading Volume ◽  
Negative Relationship ◽  
Positive Association ◽  
Vital Role ◽  
Market Volatility ◽  
Market Returns ◽  
Stock Market Returns ◽  
Stock Market Trading

Empirical evidence indicates that foreign institutional investors (FIIs) play a vital role in financial markets, and being the major players, they demonstrate positive feedback trading behaviour and usually follow one another’s actions. In order to examine this phenomenon, the present study endeavoured to unearth the relationship between foreign institutional investments (FIIs) and returns in the Indian stock market, trading volume and volatility. The return of the Nifty50 index has surrogated market returns, while volatility is represented by conditional volatility computed from Nifty50, from January 1999 to May 2017. The vector autoregression (VAR) results indicate a positive association between herding among FIIs and lagged market returns, while information asymmetry has no impact on herding. On the other hand, previous-day volatility has a significant bearing on the herding measure. Overall, the results portray a significant relationship between herding and stock market returns in India. The results of multivariate regression exhibit that market return was a primary factor for FII herding during the study period under consideration, while trading volume bore no relationship with herding. In case of market volatility, the empirical results are in congruence with the fact that during the period of the volatile market, FIIs prefer to not indulge in herding. Furthermore, the results of three sub-periods, that is, before, during and after the crisis, are similar to the results of the whole study period which indicates that the return is a prime and vital force for herding; on the contrary, market volatility appears to have a negative relationship with herding.

scholarly journals Does liquidity drive stock market returns? The role of investor risk aversion

2021 ◽  
Author(s):  
Qingjing Zhang ◽  
Taufiq Choudhry ◽  
Jing-Ming Kuo ◽  
Xiaoquan Liu
Keyword(s):  
Stock Market ◽  
Risk Aversion ◽  
Market Returns ◽  
Stock Market Returns

AVALANCHE DYNAMICS AND TRADING FRICTION EFFECTS ON STOCK MARKET RETURNS

1999 ◽  
Vol 10 (06) ◽  
pp. 1149-1162 ◽  
Author(s):  
GIULIA IORI
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Feedback Mechanism ◽  
Trading Behavior ◽  
Market Returns ◽  
Stock Market Returns ◽  
Demand And Supply ◽  
Volatility Clustering ◽  
Trade Friction ◽  
Trading Friction

We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. A generalized version of the Random Field Ising Model (RFIM) is introduced to describe trading behavior. Imitation effects, which induce agents to trade, can generate avalanches in trading volume and large gaps in demand and supply. A trade friction is introduced which, by responding to price movements, creates a feedback mechanism on future trading and generates volatility clustering.

scholarly journals Stock Return Predictability and Market Efficiency in Pakistan; A Role of Asian Growing Economies of India and Malaysia

2021 ◽  
Vol 2 (2) ◽  
pp. 257-267
Author(s):  
Syed Usman Qadri ◽  
Naveed Iqbal ◽  
Syeda Shamaila Zareen
Keyword(s):  
Stock Market ◽  
Market Efficiency ◽  
Market Returns ◽  
Stock Return Predictability ◽  
Stock Market Returns ◽  
Stock Market Crash ◽  
Growing Stock ◽  
Returns Predictability ◽  
Daily Returns

The purpose of this study is to determine the predictability of the Pakistani stock market's one-day forward returns by utilizing lagged daily returns for Pakistan, India, and Malaysia from 2006 to 2016. The findings indicate that lagged Pakistani market returns significantly predict Pakistani one-day ahead market returns. However, the other two growing stock markets, India and Malaysia, show no association with one-day ahead market returns. Mostly, stock market behavior in the pre-2008 and post-2008 eras was the same, although industry return behaviour was different due to the economic crisis of 2008. However, the Pakistani stock market one-day ahead returns predict the own Pakistani lag returns due to an inefficient market and prices do not follow a random walk. As a result, investors and financial analysts can foresee and generate anomalous returns by using previous data and information. Key words: Stock Market Returns Predictability, Stock Market crash, Market efficiency

scholarly journals The impact of tail risk on stock market returns: The role of market sentiment

2019 ◽  
Vol 59 ◽  
pp. 289-301 ◽  
Author(s):  
Thanaset Chevapatrakul ◽  
Zhongxiang Xu ◽  
Kai Yao
Keyword(s):  
Stock Market ◽  
Market Returns ◽  
Tail Risk ◽  
Stock Market Returns ◽  
Market Sentiment ◽  
The Impact

The Euro and Convergence among Stock Markets of Germany, France and Italy

2009 ◽  
Vol 9 (1) ◽  
pp. 1850157 ◽  
Author(s):  
Matiur Rahman ◽  
M. Moosa Khan
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Causal Effects ◽  
Market Returns ◽  
Stock Market Returns ◽  
Monthly Data ◽  
Empirical Results ◽  
Dummy Variable ◽  
Short Run

This paper re-examines the role of the euro in enhancing the convergence among stock markets of Germany, France and Italy. The VAR-framework is implemented with a dummy variable. A pre- and post-euro analysis is also performed with an exclusion of the dummy variable. Monthly data on stock market returns from February 1994 through December 2007 are employed. The empirical results reveal evidence of significant convergence among the above markets during the post-euro era relative to the pre-euro era with net positive short-run causal effects.

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