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Experimental And Empirical Studies Of Investor Behavior

Posted on:2007-02-09Degree:DoctorType:Dissertation
Country:ChinaCandidate:S LinFull Text:PDF
GTID:1119360212984619Subject:Accounting
Abstract/Summary:PDF Full Text Request
Behavioral finance become popular because traditional finance couldn't explain all anomalies in reality. Lots of researche in behavioral finance focus on how investor process and use information to make decision and what's the effect of cognitive biases on investor's decision from empirical angle,. And many experiments and empirical studies suggest that human behavior in financial market is not rational,expectable and unbiased. Some errores often appear in their behavior,which result in market anomalies regularly. In this dissertation, we will focus on Chinese investors' behavior from individual investors' decision making, institutional investors' herding and feedback trading, and market overreaction and underreaction.About individual investors in China market, we found that whenever stock price goes up or goes down continuously, gambler's fallacy will dominate hot-hand effect in investor's information process to serial changing stock price with psychological experiments. When stock price goes up continuously, the longer the price up, the larger is the probability that investor think the price will drop down in next period, and the tendency to sell it get more evident. On the other hand, when stock price drops down continuously, the longer the price down, the larger is the probability that investor think the price will go up in next period, and the tendency to buy it became larger. These results suggest that at least psychological factor exist in the individual investor that hope the market will reverse to bullish in today's bearish Chinese stock market. Disposition effect is also found in the experiments, which is more evident in female investor than in male investor and more evident in the investor with low level investment knowledge and less experience than those with higher level. Experiments also indicate that Chinese investors like short-term investing which is much shorter than one year.In the study on institutional investors of China, with the quarterly data from the forth quarter in 1999 to the forth quarter in 2004 which is the percentage of fund holding of the all A share stock in China, we found that in the percentage change of fund holding positively correlate with the stock return after controlling the effect of the company size in herding interval. The results suggest that either institutional investors positive-feedback trade more than other investors or institutional herding impacts prices more than herding by other investors.We also found that instituitonal investors have more useful information than other investors, and theire tradingIn the study of overreaction and underreaction of bullish and bearish market if China, we find obvious differences in market behavior in bullish and bearish phases. Loser portfolio appears overreaction in bullish market and underreaction in bearish market while winner portfolio appears underreation in bullish market and underreaction in bearish market.Possible reasons are provided in the end.
Keywords/Search Tags:psychology experiments, hot-hand effect, gambler's fallacy, herd behavior, feedback trading, overreaction, underreaction
PDF Full Text Request
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