behavioral finance
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2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Edoardo Lozza ◽  
Cinzia Castiglioni ◽  
Andrea Bonanomi ◽  
Federica Poli

PurposeThe paper aims to examine whether financial advisors can understand the symbols and meaning that investors associate with money and whether such ability plays any role in enhancing the advisor-investor relationship in terms of satisfaction, level of trust, referral propensity and loyalty.Design/methodology/approach The authors used a dyadic research design. A total of 186 dyads of financial advisors and their clients took part in the study and completed two parallel self-administered questionnaires.Findings The authors found that financial advisors often can detect the emotional associations that their clients attribute to money. Such ability can enhance their relationship with investors.Research limitations/implicationsThe main limitation of this study is its exploratory nature and the convenience sampling technique that was adopted. Therefore, researchers are encouraged to test the main findings further.Practical implicationsThe results have implications for the development of ad-hoc psychological training to enhance the relationship between financial advisors and investors. Understanding the symbolic meanings and the emotions that clients associate with money may be a prerequisite for a financial services company to succeed and be competitive in the sector.Originality/valueDespite acknowledging that money is not a neutral object but is layered with symbolic meanings and emotional associations, the behavioral finance literature has so far neglected to study these implications from either a theoretical or a practical point of view. This paper aims to fill this gap by investigating the symbolic value of money in the financial services industry.


2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Todd Feldman ◽  
Shuming Liu

PurposeThe author proposes an update to the mean variance (MV) framework that replaces a constant risk aversion parameter using a dynamic risk aversion indicator. The contribution to the literature is made through making the static risk aversion parameter operational using an indicator of market sentiment. Results suggest that Sharpe ratios improve when the author replaces the traditional risk aversion parameter with a dynamic sentiment indicator from the behavioral finance literature when allocating between a risky portfolio and a risk-free asset. However, results are mixed when using the behavioral framework to allocate between two risky assets.Design/methodology/approachThe author includes a dynamic risk aversion parameter in the mean variance framework and back test using the traditional and updated behavioral mean variance (BMV) framework to see which framework leads to better performance.FindingsThe author finds that the behavioral framework provides superior performance when allocating between a risky and risk-free asset; however, it under performs when allocating between risky assets.Research limitations/implicationsThe research is based on back testing; therefore, it cannot be concluded that this strategy will perform well in real-time circumstances.Practical implicationsPortfolio managers may use this strategy to optimize the allocation between a risky portfolio and a risk-free asset.Social implicationsAn improved allocation between risk-free and risky assets that could lead to less leverage in the market.Originality/valueThe study is the first to use such a sentiment indicator in the traditional MV framework and show the math.


2021 ◽  
Vol 2021 ◽  
pp. 1-14
Author(s):  
Xiaohong Shen ◽  
Gaoshan Wang ◽  
Yue Wang

This paper investigates whether and how the research reports issued by securities companies affect stock returns from the perspective of investor sentiment in China. By collecting research reports and investor comments from a popular Chinese investor community, i.e., East Money, we derive two indices that represent the information contained in research reports: one is the attention of research reports and the other is the average stock rating given by research reports; then we develop an investor sentiment indicator using the machine learning method. Based on behavioral finance theory, we hypothesize that research reports have a significant effect on stock returns and investor sentiment plays a mediating role in it. The empirical analysis results confirm the above hypotheses. Specifically, the average stock rating given by research reports can better predict future stock returns, and investor sentiment plays a partial mediating role in the relationship between stock rating and stock returns.


2021 ◽  
Vol 11 (2) ◽  
pp. 237-248
Author(s):  
Elkunny Dovir Siratan ◽  
Temy Setiawan

The investment decision-making process is influenced by various factors, including financial literacy and demographic factors. This research examines the impact of demographic factors and financial literacy with behavioral finance as a mediation on investment decision making.  This research using structural equation model (SEM) analysis. The result shows that demographic factors through gender, age, education, income, occupation and experience have an influence and cause a specific behavior in investment decision making. Then the financial literacy factor has an influence in reducing negative behavior. Likewise, demographic factors and financial literacy with behavioral finance as a mediation on investment decisions have a positive influence. The existence of behavior that is manages with planning, financial literacy support, and demographic factors owned by individual investors will create an opportunity for market momentum. Which help maximize profit, better investment and portfolio performance, avoid risks, better investment decision, and forming trading strategies.


Pressacademia ◽  
2021 ◽  
Vol 14 (1) ◽  
pp. 106-107
Author(s):  
Thorsten Hens ◽  
Vahit Ferhan Benli
Keyword(s):  

2021 ◽  
Vol 3 (1-2) ◽  
pp. 08-23
Author(s):  
Selim Aren ◽  
Hatice Nayman Hamamci

Decision-making processes occur with the interaction of some cognitive and psychological variables. Neoclassical theories deal with rational reactions in these processes. However, in an environment where there is no information or where there is uncertainty instead of risk, decisions cannot be made rationally as the mind indicates. In this direction, firm managers have to make many decisions under uncertainty. For this reason, managers resort to various simple and useful shortcuts called bias for different reasons. In this study, it was aimed to reveal the effects of behavioral biases on management decisions. In this context, five biases in the behavioral finance literature, namely overconfidence, status quo, anchoring, hindsight and availability, were evaluated with theoretical and empirical studies and their effects on managerial decisions were discussed. It was seen that raising awareness of these biases in terms of managers provides benefits such as realistic evaluation of themselves, giving more realistic weights to events when making decisions, reaching rational judgments more easily and being open to innovations. In addition, this awareness, when combined with the emotional competencies of managers, helps them make successful decisions.


2021 ◽  
Vol 5 (2) ◽  
pp. 1095-1108
Author(s):  
Tuti Anggraeni ◽  
Nugraha Nugraha ◽  
Maya Sari ◽  
Dodi Sukmayana

Tujuan penelitian ini adalah untuk menganalisis pengaruh bevaioral finance dengan mengunakan factor bias overconfidence terhadap pengambilan keputusan hutang pada UMKM dan pengaruh behavioural finance  dengan menggunakan factor bias illusion of control  terhadap pengambilan keputusan hutang pada UMKM. Penelitian ini merupakan penelitian berbasis kuantitatif, dengan jenis metoda penelitian yang dipakai adalah Regresi Linier Berganda. Penelitian ini menggunakan 59 sampel pelaku usaha UMKM sector makanan  yang berada di wilayah Kota Bandung. Teknik pengambilan sampel yang dipilih dalam penelitian ini adalah dengan cara teknik sampling insidental dan pengumpulan data menggunakan kuesioner yang disebarkan kepada responden yaitu pelaku sekaligus pemilik UMKM. Teknik analisis data yang digunakan dalam penelitian ini adalah regresi linear berganda.  Hasil penelitian menunjukkan adanya pengaruh overconfidenceyang signifikan terhadap pengambilan keputusan hutang disaat era pandemic covid-19 yang dilakukan oleh pelaku usaha UMKM sector makanan  yang berada di wilayah Kota Bandung. Dan hasil penelitian pun menujukan bahwa ada pengaruh signikan dari factor bias illusion of control  terhadap pengambilan keputusan hutang disaat era pandemic covid-19 yang dilakukan oleh pelaku usaha UMKM sector makanan  yang berada di wilayah Kota Bandung.Keputusan Berhutang yang dilakukan pelaku UMKM sector makanan di kota Bandung ini dipengaruhi oleh karakteristik responden yang memiliki usia produktif 36 sampai dengan 40 tahun, sebagian besar perempuan dengan latar belakang Pendidikan  perguruan tinggi yang sudah menggeluti usaha lebih dari 5 tahun.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yang Gao ◽  
Yangyang Li ◽  
Yaojun Wang

PurposeThis paper aims to explore the interaction between investor attention and green security markets, including green bonds and stocks.Design/methodology/approachThis study takes the Baidu index of “green finance” as the proxy for investor attention and constructs several generalized prediction error variance decomposition models to investigate the interdependence. It further analyzes the dynamic interaction between investor attention and the return and volatility of green security markets using the rolling time window.FindingsThe empirical analysis and robustness test results reveal that the spillovers between investor attention and the return and volatility of the green bond market are relatively stable. In contrast, the spillover level between investor attention and the green stock market displays significant time-varying and asymmetric effects. Moreover, the volatility spillover between investor attention and green securities is vulnerable to major financial events, while the return spillover is extremely sensitive to market performance.Originality/valueThe conclusion further expands the practical application and theoretical framework of behavioral finance in green finance and provides a new reference for investors and regulators. Besides, this study also lays a theoretical basis for investors to focus on the practical application of volatility prediction and risk management in green securities.


2021 ◽  
Vol 13 ◽  
pp. 225-228
Author(s):  
Mengshan Zhang

GameStop Corp. is a video game retailer, which has been in hard time over the outbreak of COVID-19, resulted a volatile share price in markets. This article is trying to analyze the actual value of the GameStop Corp. via two different approaches- quantitative and qualitative, in order to calculate the company’s market value and reach a conclusion about the share price of GameStop, by looking at it from different aspects, such as some data from company’s balance sheets, quarter and annual reports overtime, GameStop’s loyalty programmes, and behavioral finance.


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