Download or read book Three Essays on Investor Heterogeneous Beliefs written by Yi Zhang and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Heterogeneous Beliefs in Financial Markets written by Hao Sun and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Evolution Reputation and Rationality written by Dmitry Shapiro and published by LAP Lambert Academic Publishing. This book was released on 2009-08 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book consists of three parts. The first part analyzes the stock market dynamic under the presence of agents with heterogeneous beliefs and connects it to commonly observed asset overvaluation. Its two main results are that the long-run equilibrium price is the risk-neutral fundamental price even though all agents are risk-averse and that heterogeneity of beliefs persists. The second chapter describes the interactions between a borrower and creditors, where the borrower has private information, and the loan sizes are determined endogenously by the competitive credit market. It is shown that without behaviorally honest types all equilibria but one are inefficient and result in the country's eventual default. The result helps to explain why developing countries often fail to establish a good reputation in order to attract potential investors. The third chapter experimentally analyzes the importance of utility and action interdependence in subjects' reasoning. The results show that such recent theories as fairness, altruism, reciprocation, etc. have a rather modest effect and explain less than half of subjects' deviation from payoff-maximizing behavior.

Download or read book Essays on Investor Heterogeneity written by David Weinbaum and published by . This book was released on 2002 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Beliefs and Decision Making in Asset Markets written by Yaron Lahav and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Investor Confidence written by Christoph Meier and published by . This book was released on 2017 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: This PhD research is committed to contributing to the literature on investor overconfidence, one of the most robust findings in the field of behavioural finance. Overconfidence, a cognitive bias where decision makers tend to be overly optimistic not only about their aptitudes and skills, but also about the precision of their forecasts and information, is associated with poor decision making. Individuals suffering from overconfidence tend to be excessive stock traders, Chief Executive Officers (CEOs) who rush into mergers and acquisitions, risky drivers, naïve entrepreneurs and sloppy retirement planners. The literature yields the many attempts to link stock market phenomena to overconfidence. However, existing measures that have been used to test these hypotheses are typically only loosely related to the overconfidence of investors in their own abilities, or use proxies that lack a formal model of cognitive psychology. In the first of three research projects, I propose a measure of aggregate investor confidence that is based on a cross-disciplinary model containing determinants of confidence. The measure captures major economic events intuitively, and is statistically distinct from exiting proxies. Using a 1926-2011United States (US) sample, I find that the new measure is a better predictor of aggregate trading activity than past stock returns, which have been used in prior studies.The second research project explores the role of aggregate investor confidence in asset pricing factors. Empirical tests reveal interesting patterns. Firstly, and in line with a behavioural model by Daniel, Hirshleifer, and Subrahmanyam (1998), aggregate investor confidence partially explains variations in the profitability of momentum strategies. Additionally, aggregate investor confidence appears to play a key role in the size factor, complementing an early hypothesis by Roll (1981). Indeed, investors seem to systematically change their risk perceptions which ultimately impacts on market outcome. The third research project takes a qualitative stance. Using a new methodology proposed by Glaser, Langer, and Weber (2013), we utilise the ability to assess time series variations of individual overconfidence levels in an experimental asset market. We find that arriving signals that strongly support prior decisions cause overconfidence to prevail, while strongly opposing signals cause the effect to vanish 'overconfidence crashes'. However, previously lost overconfidence can re-emerge when these opposing signals reverse .Additionally, we find strong evidence in favour of the hypothesis by Hongaund Stein (2007) which states that investors interpret arriving information differently with opposing feedback having particularly strong effects. We also find measurement bias in the methodology proposed by Glaser et al. (2013). This is consistent with methodological concerns documented by Langnickeland Zeisberger (2016) and Biais, Hilton, Mazurier, and Pouget (2005) who report that assessment tasks using confidence intervals typically yield inflated overconfidence scores, as individuals tend to be insensitive to confidence levels in their estimations.

Download or read book Three Essays on Financial Markets and Institutional Investors written by Blake Phillips and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on the Psychology of Investment and Financial Markets written by Amine Jalal and published by . This book was released on 2007 with total page 118 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Role of Beliefs in Financial Markets written by Mohamad Mahmoud Al-Ississ and published by . This book was released on 2010 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third essay investigates a seldom explored relationship, that between religion and financial markets. This study examines the effect of religious experience during the Muslim holy days of Ramadan and Ashoura on the daily returns and trading volume of seventeen Muslim financial markets. It uses the special characteristics of the Muslim lunar calendar to isolate the elusive effect of faith. The study documents statistically significant changes in daily returns and trading volume associated with religious experiences. The essay utilizes the heterogeneity of worship intensity within Ramadan as a natural experiment to validate the results' robustness.

Download or read book Three Essays in Finance and Macroeconomics written by Stavros Panageas and published by . This book was released on 2005 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter I investigate whether firms' physical investments react to the speculative over-pricing of their securities. I introduce investment considerations in an infinite horizon continuous time model with short sale constraints and heterogeneous beliefs along the lines of Scheinkman and Xiong (2003) and obtain closed form solutions for all quantities involved. I show that market based q and investment are increased, even though such investment is not warranted on the basis of long run value maximization. I use a simple episode to test the hypothesis that investment reacts to over-pricing. With publicly available data on short sales during the 1920's, I examine both the price reaction and the investment behavior of a number of companies that were introduced into the "loan crowd" during the first half of 1926. In line with Jones and Lamont (2002), I interpret this as evidence of overpricing due to speculation. I find that investment by these companies follows both the increase and the decline in "q" before and after the introduction, suggesting that companies in this sample reacted to security over-pricing. In the next chapter of the thesis (co-authored with E. Farhi) we study optimal consumption and portfolio choice in a framework where investors save for early retirement. We assume that agents can adjust their labor supply only through an irreversible choice of their retirement time. We obtain closed form solutions and analyze the joint behavior of retirement time, portfolio choice, and consumption. In the final chapter of the thesis (co-authored with R. Caballero) we turn attention to hedging of sudden stops. We observe that even well managed emerging market economies are exposed to significant external risk, the bulk of which is financial. We focus on the optimal financial policy of such an economy under different imperfections and degrees of crowding out in its hedging opportunities.

Download or read book Three Essays on Financial Markets and Institutions written by Marcos Rietti Souto and published by . This book was released on 2005 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Behavioral Finance written by Xing Huang and published by . This book was released on 2013 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contains three essays in behavioral finance. It explores investors' (non-standard) behaviors and their impacts on market efficiency and market valuations. I strive to empirically characterize how market participants behave, and to identify how these behaviors can improve our understanding of the financial market. The first chapter studies the impact of prior investment experience in an industry on the subsequent purchase of new stocks in the same industry. Using trading records data for households at a large discount broker from 1991 to 1996, I establish that the experience of positive excess returns in a given industry increases the probability of purchasing similar stocks in that industry relative to other industries. This result is robust to industry momentum, wealth effects, and investor heterogeneity. The effect decays when the experience is further in the past. Furthermore, I find that investor sophistication mitigates this experience effect. These results are consistent with mechanisms where investors put more weight on their own experience than on other available historical information when updating the beliefs about an industry's future return. The results are also consistent with investors learning about their stock-picking ability in an industry from their experienced outcomes. In the second chapter, I ask the question: do investors slow to incorporate return-relevant information if it reflects firms' operations abroad? Using the corresponding industry return in the foreign countries, I show that foreign operations information is slowly incorporated into stock prices. A trading strategy exploiting the foreign operations information of multinational firms generates a monthly abnormal return of approximately $0.80$ percentage points, controlling for risk-based factors. The return predictability is not driven by U.S. industry momentum, global industry momentum or foreign country-specific industry momentum. The third chapter further explores the underlying mechanism to explain the market under-reaction to foreign information identified in the second chapter. The return predictability becomes more pronounced for smaller firms and firms with less analyst coverage, lower institutional holdings, lower fraction of foreign operations and more complicated international operations structure. I also find that stock prices respond more to foreign operations information during the month of a quarterly earnings announcement or when there is more foreign news relative to domestic news appearing in the media. In addition, information about firms' operations in Asia is delayed more than information about operations in Europe and English-speaking countries. These results are consistent with the hypothesis that news about multinational firms' foreign operations diffuses gradually, indicating investors' limited attention and processing capacity for foreign information.

Download or read book Three Essays in Macroeconomics and Finance written by Yang Li and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1 develops a continuous-time, heterogeneous agents version of the Barro-Rietz rare disasters model. Following Gabaix (2012), the disaster probability is assumed to be time-varying. The economy consists of two types of agents: (1) a "rational" agent, who updates his beliefs using Bayes Rule, and (2) a "robust" agent, who updates his beliefs using a pessimistically distorted prior. Following Hansen and Sargent (2008), pessimism is disciplined using detection error probabilities. Disaster risk is assumed to be nontradeable. The model is calibrated to US data, and focuses on three disaster episodes: (1) The Great Depression of 1929-33, (2) The Financial Crisis of 2008-09, and (3) The Covid Pandemic of 2020. The key contribution of the paper is to show that the model can replicate the observed spike in trading volume that occurs during disasters. Trading produces endogenous low frequency dynamics in the distribution of wealth. The relative wealth of robust agents gradually declines during normal times, but rises sharply during disasters. These results sound a note of caution when interpreting short-run movements in the distribution of wealth. Chapter 2 examines the market selection hypothesis in a continuous time asset pricing model with jumps. It is shown that the hypothesis is valid when agents have log preferences. The result is robust as it does not depend on whether markets are incomplete. Jumps affect long-run wealth dynamics through a redistribution channel: Disasters lead to large wealth redistribution as agents with heterogeneous beliefs about disasters have different exposures to risky assets. Using tools from ergodic theory, I prove a novel result that generalizes the rationality concept in the existing literature: an agent endowed with the optimal filter will outperform other agents in complete financial markets asymptotically. Chapter 3, a joint paper with Xiaowen Lei, develops a continuous-time overlapping generations model with rare disasters and agents who learn from their own experiences. Using microdata about household finance in China, we establish that economic disasters such as the Great Leap Forward make investors distrustful of the market. Generations that experience disasters invest a lower fraction of their wealth in risky assets, even if similar disasters are not likely to occur again during their lifetimes. "Fearing to attempt" therefore inhibits wealth accumulation by these "depression babies" relative to other generations.

Download or read book Essays in Asset Pricing and Institutional Investors written by Qi Shang and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The thesis includes three papers: 1. Limited Arbitrage Analysis of CDS Basis Trading By modeling time-varying funding costs and demand pressure as the limits to arbitrage, the paper shows that assets with identical cash-flows have not only different expected returns, but also different expected returns in excess of funding costs. I solve the model in closed-form to show that the arbitrage on the CDS and corporate bond market is a risky arbitrage. The sign of the expected excess return of the arbitrage is decided by the sign and size of market frictions rather than the observed price discrepancy. The size and risk of the arbitrage excess return are increasing in market friction levels and assets' maturities. High levels of market frictions also destruct the positive predictability of credit spread term structure on credit spread changes. Results from the empirical section support the above-mentioned model predictions. 2. General Equilibrium Analysis of Stochastic Benchmarking This paper applies a closed-form continuous-time consumption-based general equilibrium model to analyze the equilibrium implications when some agents in the economy promise to beat a stochastic benchmark at an intermediate date. For very risky benchmark, these agents increase volatility and risk premium in the equilibrium. On the other hand, when they promise to beat less risky benchmark, they decrease volatility and risk premium in the equilibrium. In both cases, the degree of effect is state-dependent and stock price rises. 3. Institutional Asset Pricing with Heterogenous Belief (Co-authored) We propose an equilibrium asset pricing model in which investors with heterogeneous beliefs care about relative performance. We find that the relative performance concern leads agents to trade more similarly, which has two effects. First, similar trading directly decreases volatility. Second, similar trading decreases the impact of the dominant agents. When the economy is extremely good or bad, the second effect is dominant so that the relative performance concern enlarges the excess volatility caused by heterogeneous beliefs. When the first effect is dominant, which corresponds to a normal economy, the volatility is lower than without the relative performance concern. Moreover, this paper shows that the relative performance concern also influences investors' holdings, stock prices and risk premia.

Download or read book Three Essays on Trading Volume written by Guohua Ma and published by . This book was released on 2007 with total page 141 pages. Available in PDF, EPUB and Kindle. Book excerpt: Keywords. Trading Volume, Heterogeneous Beliefs, Disposition Effect, Informational Trading, Liquidity Trading

Download or read book Three Essays on Heterogeneity in Macroeconomics written by Ryan Douglas Edwards and published by . This book was released on 2002 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Handbook on Systemic Risk written by Jean-Pierre Fouque and published by Cambridge University Press. This book was released on 2013-05-23 with total page 993 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook on Systemic Risk, written by experts in the field, provides researchers with an introduction to the multifaceted aspects of systemic risks facing the global financial markets. The Handbook explores the multidisciplinary approaches to analyzing this risk, the data requirements for further research, and the recommendations being made to avert financial crisis. The Handbook is designed to encourage new researchers to investigate a topic with immense societal implications as well as to provide, for those already actively involved within their own academic discipline, an introduction to the research being undertaken in other disciplines. Each chapter in the Handbook will provide researchers with a superior introduction to the field and with references to more advanced research articles. It is the hope of the editors that this Handbook will stimulate greater interdisciplinary academic research on the critically important topic of systemic risk in the global financial markets.