Investor Psychology And Security Market Under- And Overreactions  

Oleh:

Daniel, Kent ; Hirshleifer, David ; Subrahmanyam, Avanidhar

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 53 no. 6 (Dec. 1998), page 1839-1886.
Fulltext: p 1839.pdf (319.98KB)

Isi artikel

We propose a theory of securities market under- and overreactions based on two well-known psychological biases: investor overconfidence about the precision of private information; and biased self-attribution, which causes asymmetric shifts in investors’ confidence as a function of their investment outcomes. We show that overconfidence implies negative long-lag autocorrelations, excess volatility, and, when managerial actions are correlated with stock mispricing, public-event-based return predictability. Biased self-attribution adds positive short-lag autocorrelations ~“momentum”!, short-run earnings “drift,” but negative correlation between future returns and long-term past stock market and accounting performance. The theory also offers several untested implications and implications for corporate financial policy.

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