Editorial

Citation

Holmes, P. and Paudyal, K. (2012), "Editorial", Review of Behavioral Finance, Vol. 4 No. 1. https://doi.org/10.1108/rbf.2012.61904aaa.001

Editorial

Editorial

Article Type: Editorial From: Review of Behavioral Finance, Volume 4, Issue 1.

Welcome to Volume 4, Issue 1 of the Review of Behavioral Finance. As with all previous issues of the Review, the new issue contains some excellent papers covering a number of different areas in the field. While there is continuity for the journal in terms of the high quality of papers published by the Review, this volume marks a big and, we believe, an important change. Specifically, we are very pleased to announce that from this issue the Review of Behavioral Finance has a new publisher – Emerald Group Publishing Ltd. Since the journal was first issued in 2009 we have been very successful in publishing papers of very high quality, by excellent authors and across a range of topics and we are confident that the support facilities available at Emerald will be instrumental in maintaining and improving further the quality of papers published in the Review.

All of the papers published by the Review to date have been of a very high standard and, as editors, we are committed, in collaboration with the editorial board and the reviewers for the journal, to maintaining the high quality going forward. This is evident from the papers in the current issue, the first published by Emerald. Three papers are published in Volume 4, Issue 1, and they demonstrate the breadth of approach used for papers published in the Review.

The first, by Lasfer, Lin and Muradoglu, examines trading behaviour of domestic and foreign investors for Chinese stocks. The unique feature of the Chinese market, with A shares traded only by domestic investors and B shares on the same companies, which are identical except that up to 2001 they could only be traded by foreign investors, allows analysis to be undertaken and inferences to be drawn about the attitudes of foreign investors. Behaviour after major shocks for stocks traded in the Shanghai and Shenzhen stock exchanges over the period 1991-2004 is examined, where shocks are defined as times when the difference between the daily return and the average return of the prior 60 days is higher than two standard deviations. Such a definition results in over 13,000 shocks and the cumulative abnormal returns in the ten days following such jumps are analysed and robustness tests undertaken. Substantial differences are identified across the two types of stocks. The detailed analysis allows the authors to conclude that foreign investors are characterised by an optimism bias, which has implications not only for portfolio managers, but also investors in funds which choose to buy foreign stocks.

Using a large sample of IPOs with and without warrants Howe and Nikolic, in their paper “Catering for security types: the case of warrants”, have examined whether the decision to issue warrants in an IPO is subject to catering influences. In their analysis the authors estimate the market warrant premium and assess whether it relates to the probability of firms including warrants in their IPOs. The findings that are based on rigorous analysis strongly support the catering influence on the firm's decision to include warrants in its IPO. They show evidence of a time-varying warrant premium/discount and there is variation in the relative valuation of warrant firms vis-à-vis firms without warrants in their capital structure. The study provides further support for the notion that managers cater to investor preferences for warrants from a test of catering for security types in the context of seasoned equity offerings and provides evidence of the importance of sentiment when firms make choices about the securities sold in an offering.

“Overconfidence and debiasing in the financial industry” by Kaustia and Perttula is our third paper in the current issue. Using survey field experiments, where the respondents are Scandinavian finance professionals (bank branch managers and financial advisers), and following a series of tests, overconfidence is demonstrated in relation to issues relevant to the field of the respondents. No relationship is found between the extent of overconfidence and gender, income or level of education, but bank branch managers with greater experience exhibit less overconfidence. However, no such relationship between experience and overconfidence is found for financial advisers. Attempts at debiasing these professionals, through lectures on investor psychology and written warnings, produce limited success and indicate the deep rooted nature of overconfidence in probability assessment. In the light of recent events in financial markets, particularly in the banking sector, the findings of this paper are of great interest not only for academics, but also for industry professionals and regulators. Taken together, these three papers make important contributions to the field.

Looking forward, we believe that the change of publisher will ensure that we continue to publish high quality work in the future and will allow us to grow and develop the journal further, given Emerald's substantial track record. Whilst Emerald have a relatively large portfolio of over 290 journals, they are able to offer each journal individual attention and are known for working collaboratively with editorial boards. We know from detailed discussions with them over a number of months that Emerald is committed to helping us grow and develop the journal in terms of direction, reach and the maintenance of the high quality we have established over the last few years.

As part of Emerald's portfolio, the Review will be included within their established accounting and finance subject area. Consistent with the realm of the Review, journals published in this subject area by Emerald cover quantitative and qualitative research across the field, including in finance, financial regulation, accounting and many other broad based and specialist areas. The journals published by Emerald are used widely in both practice and academic research and the authors are drawn from leading academic institutions and corporations worldwide. In addition, the Review has been allocated its own publisher (Sarah Roughley) and assistant publisher (Mark Wade) who will be responsible for looking after and developing the journal. We believe that this dedicated attention can only be to the journal's benefit.

To date, the Review has not published special issues or issues based around a theme. However, we expect that in future special and themed issues will be published. Indeed, we already have one planned in the area of behavioural finance and economic psychology. We will be pleased to receive ideas and proposals for future issues dedicated to a particular topic.

For those of you new to the journal, Emerald is making two previously published papers freely available through the journal web site (www.emeraldinsight.com/rbf.htm). The papers in question are:

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  “Asymmetric asset price reaction to news and arbitrage risk” by John A. Doukas and Meng Li.

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  “Optimal financial naïveté” by Avanidhar Subrahmanyam.

We would like to take this opportunity to thank the following authors whose work has been published in the first three volumes of the Review of Behavioral Finance:

Amber AnandAntonios AntoniouRamaprasad BharDavid BlakeRobert BrooksPornanong BudsaratragoonAlistair ByrneJohn A. DoukasRobert FaffStephen R. FoersterAlan GregoryDavid M. HarrisonPing HeDavid HillierXiaoqing HuMasaya IshikawaGregory KoutmosSuntharee LhaopadchanMeng LiAnastasios G. MalliarisGraham MannionDalia MarciukaityteDaniel MulinoSubhankar NayakGioia PescettoRichard ScheelingsMichael J. SeilerAvanidhar Subrahmanyam (2 papers)Samuel H. SzewczykHidetomo TakahashiSusan M. Young

We would also like to thank all the members of the editorial board who have played an important part in the success of the journal to date. The board is made up of leading researchers in the field and the international coverage of the board is also noteworthy and of importance. Their contribution has been invaluable to us in establishing the journal so effectively and we thank them for their continued support as we drive the journal forward. We would also like to take this opportunity to welcome Daniel Broby of Silk Invest, UK to the editorial board.

Finally, we would like to thank the very many people who have given their time as reviewers for the journal. The Review has received many papers as submissions and it is only through the activities and commitment of our reviewers that we have been able to ensure the quality of the papers published. The quality of the reports they have provided, and the timeliness with which reviews have been submitted, are very important to the Review.

Background on Emerald

Founded in 1967, Emerald has become the world's leading scholarly publisher of journals and books in business and management with a strong and ever growing presence in other disciplines including LIS, social sciences and engineering.

Over 3,000 institutions worldwide subscribe to Emerald content and all of the world's top 100 business schools (listed by the Financial Times Global MBA Rankings 2011 – FT 100) have Emerald authors, demonstrating their impact on the international stage. We firmly believe that by publishing with Emerald the journal content will be disseminated to a truly global audience, through a process of high quality production and technology, with the help and support of a dedicated team of professional publishers, marketers and customer service experts.

If you have any questions about the new and exciting changes to the publication of the Review of Behavioral Finance, or if you have any ideas for its continual development and promotion, including for special or themed issues, please do not hesitate to contact us.

Phil Holmes and Krishna Paudyal