Search results

1 – 10 of 19
To view the access options for this content please click here
Article
Publication date: 20 May 2020

Werner De Bondt

Are the capital markets of leading industrialized nations rational and efficient? This powerful hypothesis was badly dented by the work of De Bondt and Thaler (1985) on…

Abstract

Purpose

Are the capital markets of leading industrialized nations rational and efficient? This powerful hypothesis was badly dented by the work of De Bondt and Thaler (1985) on stock market overreaction and by subsequent research on momentum and reversals in prices and earnings.

Design/methodology/approach

Human psychology, at times predictably irrational, drives the markets. This paper investigates this issue.

Findings

The author reviews the origins of the idea of overreaction, how behavioral insights modify standard asset pricing theory and how they contribute to our understanding of the world of finance.

Originality/value

The paper reveals the origins of the idea of overreaction, how behavioral insights modify standard asset pricing theory and how they contribute to our understanding of the world of finance.

Details

Review of Behavioral Finance, vol. 12 no. 1
Type: Research Article
ISSN: 1940-5979

Keywords

To view the access options for this content please click here
Article
Publication date: 5 October 2010

Werner De Bondt

The purpose of this paper is to discuss the financial turmoil of 2008 that followed the collapse of the housing bubble in the USA which was the starting point of a global…

Abstract

Purpose

The purpose of this paper is to discuss the financial turmoil of 2008 that followed the collapse of the housing bubble in the USA which was the starting point of a global economic crisis. Huge costs are borne by every part of society. Much wealth has been destroyed. Millions of jobs have been lost. The crisis has tarnished faith in free enterprise, in the financial system, and in financial theory. Likely, the era of laissez‐faire capitalism that started during the Reagan‐Thatcher years is ending. We are entering a period of profound uncertainty. It is imperative that the moral dimension of capitalism be restored.

Design/methodology/approach

The paper is based on a review of theory and historical evidence relating to financial bubbles and financial regulation.

Findings

The author offers suggestions on how to rebuild the global financial system. We need: a systemic risk regulator, independent from business and political influence; higher capital requirements for all systemically significant financial service firms; restrictions on proprietary trading in commercial banks; transparency in derivatives; new ways to compensate bankers that reduce the incentive to take excessive risks; consumer protection against defective financial products; and the re‐establishment of the principle of fiduciary duty.

Practical implications

The paper lists practical suggestions on how to reform the global financial system.

Social implications

Economic success is based on trust. After the 2008 crisis, regulatory reform is the best way to rebuild trust in the financial system.

Originality/value

The paper offers a unique perspective based in part on insights drawn from behavioral finance.

Details

Qualitative Research in Financial Markets, vol. 2 no. 3
Type: Research Article
ISSN: 1755-4179

Keywords

To view the access options for this content please click here
Article
Publication date: 18 May 2020

Meir Statman

The purpose of this paper is to depict how the author's way from standard finance to the first and second generations of behavioral finance illustrates the ongoing general…

Abstract

Purpose

The purpose of this paper is to depict how the author's way from standard finance to the first and second generations of behavioral finance illustrates the ongoing general transition.

Design/methodology/approach

The first generation, starting in the early 1980s, largely accepted standard finance's notion of people's wants as “rational” wants – restricted to the utilitarian benefits of high returns and low risk. That first generation commonly described people as “irrational” – succumbing to cognitive and emotional errors and misled on their way to their rational wants. The second generation describes people as normal.

Findings

It begins by acknowledging the full range of people's normal wants and their benefits – utilitarian, expressive and emotional – distinguishes normal wants from errors and offers guidance on using shortcuts and avoiding errors on the way to satisfying normal wants. People's normal wants include financial security, nurturing children and families, gaining high social status and staying true to values. People's normal wants, even more than their cognitive and emotional shortcuts and errors, underlie answers to important questions of finance, including saving and spending, portfolio construction, asset pricing and market efficiency.

Originality/value

The article identifies that people's normal wants include financial security, nurturing children and families, gaining high social status and staying true to values. People's normal wants, even more than their cognitive and emotional shortcuts and errors, underlie answers to important questions of finance, including saving and spending, portfolio construction, asset pricing and market efficiency.

Details

Review of Behavioral Finance, vol. 12 no. 1
Type: Research Article
ISSN: 1940-5979

Keywords

Content available
Article
Publication date: 5 October 2010

Bruce Burton

Abstract

Details

Qualitative Research in Financial Markets, vol. 2 no. 3
Type: Research Article
ISSN: 1755-4179

Content available
Article
Publication date: 18 May 2010

Abstract

Details

Asian Review of Accounting, vol. 18 no. 1
Type: Research Article
ISSN: 1321-7348

To view the access options for this content please click here
Article
Publication date: 11 May 2021

Kiryanto Kiryanto, Indri Kartika and Zaenudin Zaenudin

Certification information published by a company will be responded by the market. Therefore, the purpose of this study is to examine the impact of ISO 9001 certification…

Abstract

Purpose

Certification information published by a company will be responded by the market. Therefore, the purpose of this study is to examine the impact of ISO 9001 certification on the stock market reaction as indicated by stock returns reaction of companies in Indonesia.

Design/methodology/approach

This study used event study method with the period of 13 days. It consists of 6 days before and after ISO 9001 certification announcement and 1 day at the time of the event. It analyzed by using pair sample t-test and one sample t-test. The stock return data is obtained from companies that are ISO 9001 certified and it tested for their stock reactions before and after the certification.

Findings

The results of empirical research showed that the average and companies cumulative abnormal returns in Indonesia react quickly and positively on the first day after ISO 9001 certification announcement. This study proved the differences between abnormal returns before and after the ISO 9001 certification announcement period.

Research limitations/implications

The company's success in implementing ISO 9001 will have an impact on investment in the capital market with a positive response from stock market players. The implication of this study is the further research can examine directly the impact of ISO 9001 implementation on investor behavior in the capital market.

Originality/value

Based on the development of the literature review, this is the first study which examined the impact of ISO 9001 certification announcement on investor reactions in the short term. Therefore, companies in Indonesia need to implement a quality management system for investors in Indonesia.

Details

International Journal of Quality & Reliability Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0265-671X

Keywords

To view the access options for this content please click here
Article
Publication date: 19 March 2021

Nektarios Gavrilakis and Christos Floros

The purpose of this paper is to identify whether heuristic and herding biases influence portfolio construction and performance in Greece. The current research determines…

Abstract

Purpose

The purpose of this paper is to identify whether heuristic and herding biases influence portfolio construction and performance in Greece. The current research determines the situation among investors in Greece, a country with several economic problems for the last decade.

Design/methodology/approach

A survey has been conducted covering a group of active private investors. The relationship between private investors' behavior and portfolio construction and performance was tested using a multiple regression.

Findings

The authors find that heuristic variable affects private investor's portfolio construction and performance satisfaction level positively. A robustness test on a second group, consisting of professional investors, reveals that heuristic and herding biases affect investment behavior when constructing a portfolio.

Practical implications

The authors recommend investors to select professional's investment portfolio tools in constructing investment portfolios and avoid excessive errors, which occur due to heuristic. The awareness and understanding of heuristic and herding could be helpful for professionals and decision-makers in financial institutions by improving their performance resulting in more efficient markets.

Originality/value

The main contribution of this paper lies in the fact that it is the first study on two major behavioral dimensions that affect the investor's portfolio construction and performance in Greece. The rationale of the current research is that the results are helpful for investors in order to take rational, reliable and profitable decisions.

Details

Review of Behavioral Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1940-5979

Keywords

To view the access options for this content please click here
Article
Publication date: 9 February 2010

Seonghee Oak and Michael C. Dalbor

The aim of this study is to investigate institutional investment behavior relating to lodging firms and their brand equity.

Abstract

Purpose

The aim of this study is to investigate institutional investment behavior relating to lodging firms and their brand equity.

Design/methodology/approach

Ordinary least squares (OLS) and two‐stage least squares (2SLS) regressions are used. The dependent variable is institutional investor percentage and the independent variables are advertising expenditures, size, capital expenditures, proxy Q, debt ratio, price, share turnover and year.

Findings

The study found that institutional investors' holdings are positively related to advertising expenditures. There is a significant difference in institutional holdings between lodging firms with advertising expenditures and those without. Institutions favor lodging firms that have lower debt ratios. Institutional investors prefer small firms because they typically offer superior returns.

Research limitations/implications

Further research may be done to see whether individual investors favor firms with brand equity. Additional research may be conducted in other segments, such as restaurants or casinos.

Practical implications

Findings may help lodging managers in raising financial capital from institutional investors; researchers in conducting future research on institutional investors; and educators in better describing institutional investors' important roles to hospitality students.

Originality/value

The paper is the first to show a relationship between institutional investors and advertising expenditures in the lodging industry.

Details

International Journal of Contemporary Hospitality Management, vol. 22 no. 1
Type: Research Article
ISSN: 0959-6119

Keywords

To view the access options for this content please click here
Article
Publication date: 24 August 2020

Krishna Reddy, Muhammad Ali Jibran Qamar, Nawazish Mirza and Fangwei Shi

The purpose of the study is to examine overreaction effect in the Chinese stock market after the global financial crisis (GFC) of 2007 for all the stocks listed in…

Abstract

Purpose

The purpose of the study is to examine overreaction effect in the Chinese stock market after the global financial crisis (GFC) of 2007 for all the stocks listed in Shanghai Stock Exchange (SSE) Composite 50 index.

Design/methodology/approach

To capture overreaction effect in the stock listed at SSE 50 Index, a time series analysis of average cumulative abnormal return within a unified framework is applied for the period of January 2009 to December 2015. From these loser and winner portfolios, contrarian strategy is applied to build arbitrage portfolio, which is the difference of mean reversions between loser and winner portfolios. The portfolio construction is based on a 12-month formation period and 6-month testing period for intermediate-term analysis and. for short-term analysis, 6 month formation and 3 month testing periods. The authors also applied regression analysis to test a return reversal effect for the sampled period.

Findings

Results show that contrarian strategy yields positive excess returns for the arbitrage portfolio for most of the testing periods. The intermediate baseline case shows the arbitrage portfolio producing an average excess return of 14.1%, while even the short-term one produces 4%, which is statistically significant at the 5% level. The study finds asymmetrical overreactions in the SSE especially for loser portfolios. The biggest winner and loser portfolios follow the mean reversal effect. Moreover, before-after test for the biggest winner and loser portfolios shows that the losers recovered and beat the market immediately.

Practical implications

The study could benefit government, policy makers and regulators by studying how presence of more individual investors than institutional investors of China stock market leads to more irrational decisions giving rise to volatility. The regulators could build favourable policies for institutional investors to give them incentive to invest more than individual investors through which market volatility could be controlled.

Originality/value

This research contributes to market behaviour research, showing how working under hypotheses of overreaction; gains can be made with contrarian investment strategy through arbitrage portfolios. The authors provide specific additional support for the short and medium-term overreaction in the SSE for the period 2009–2015 using regression analysis.

Contribution to Impact

This research contributes to market behaviour research, showing how working under hypotheses of overreaction; gains can be made with contrarian investment strategy through arbitrage portfolios. We provide specific additional support for the short and medium-term overreaction in the SSE for the period 2009–2015 using regression analysis.

Details

International Journal of Managerial Finance, vol. 17 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

To view the access options for this content please click here
Book part
Publication date: 4 March 2015

Rustam Jamilov

I contribute to the ongoing policy discourse on the challenges of monetary policy transmission in environments with consolidated financial sectors and high credit rates. I…

Abstract

I contribute to the ongoing policy discourse on the challenges of monetary policy transmission in environments with consolidated financial sectors and high credit rates. I empirically investigate the lending rate pass-through in Azerbaijan – a small resource-rich economy in transition – by taking advantage of a unique set of high-frequency bank-level data. My bottom-line policy message is the following. First, lending rates are considerably irresponsive to monetary policy shocks, and the interest rate channel ought to be somehow improved. Second, macroeconomic fundamentals and the concentrated bank sector are surprisingly not among the reasons behind the policy-market disconnect. Third, domestic commercial banks are able to exert substantial monopolistic pricing capacities and keep credit rates high, particularly when the central bank loosens its policy stance. Fourth, the underlying cause of both monetary policy inefficacy and high interest rate stickiness appears to be structural excess liquidity. In fact, empirical results show that pass-through is substantially higher for less liquid banks. Extraction of excess liquidity from the system should mitigate the banks’ monopolistic pricing powers, improve the efficiency of the interest rate channel, and ultimately bring the credit rates down.

1 – 10 of 19