Behavioral Finance and Capital Markets

Transcription

1 Behavioral Finance and Capital Markets

2 This page intentionally left blank

3 Behavioral Finance and Capital Markets How Psychology Influences Investors and Corporations A d a m S z y sz ka

4 BEHAVIORAL FINANCE AND CAPITAL MARKETS Copyright Adam Szyszka, Softcover reprint of the hardcover 1st edition All rights reserved. First published in 2013 by PALGRAVE MACMILLAN in the United States a division of St. Martin s Press LLC, 175 Fifth Avenue, New York, NY Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. Library of Congress Cataloging-in-Publication Data is available from the Library of Congress. A catalogue record of the book is available from the British Library. Design by Newgen Knowledge Works (P) Ltd., Chennai, India. First edition: September ISBN ISBN (ebook) DOI /

5 To those who encouraged, motivated, and supported me greatly in the effort to prepare this book. Your inspiration, friendship, and love made this possible

6 This page intentionally left blank

7 Contents List of Figures and Exhibits ix I nt ro duc t ion 1 Part I Foundations 1 Behavioral Approach versus Neoclassical Finance 9 2 Ps yc holo g ic a l A s p e c t s of D e c i sion M a k i n g 37 Part II Investor Behavior and Asset Pricing 3 I nve s tor B e h av ior 61 4 A s s e t-pr ic i n g A nom a l ie s a nd I nve s t me nt St r at e g ie s 8 7 Pa r t I I I A g g r e g a t e M a rk e t B e h av ior 5 Market-wide Consequences of Behavioral Biases B e h av ior a l I n si g ht s i nto Fi n a nc i a l C r i si s 14 3 Part IV Behavioral Corporate Finance 7 Rational Corporations in Irrational Markets Managerial Biases in Corporate Policy M a n a g e r i a l Pr a c t ic e Heuristics and Biases among Corporate Managers 241 C onc lud i n g R e m a rk s 2 65

8 viii Contents Notes 271 References 27 7 Name Index 313 Subject Index 32 3

9 Figures and Exhibits Figures 1.1 Risk reduction against the increase in the number of assets in i nve s t me nt p or t f ol io E f f ic ie nt f ront ie r Shape of a hypothetical value function v according to the pro s p e c t t he or y Shape of a hypothetical weighting function π according to t he pro s p e c t t he or y Size premium ( SMB ) in the US market in the period Book-to-market premium ( HML ) in the US market in the period Current account deficit, Consumer prices (year to year percent change), The percentage of dividend-paying firms from the NYSE, AMEX, and NASDAQ sample between 1981 and Shape of the value function suggested by Kahneman and Tversky (1979) with a dotted line marking the modification for positive arguments of small value 259 Exhibits 4.1 The relation among asset-pricing anomalies, investor behavior and its psychological background, and implications for i nve s t me nt s t r at e g y The share of dividend-paying firms by industry in the sample of NYSE, AMEX, and NASDAQ stocks in Rank distribution among items and rank parameters Results of Friedman and Wilcoxon tests Rank distribution among items and rank parameters Results of Friedman test Conditional distribution and significance tests 224

10 x Figures and Exhibits 9.6 Distribution and significance test Rank value distribution among items and rank parameters Results of Friedman and Wilcoxon tests Distribution and significance test Rank distribution among items and rank parameter R e s u lt s of Fr ie d m a n t e s t Di s t r ibut ion a nd si g n i f ic a nc e t e s t Rank distribution among items and rank parameters Results of Friedman and Wilcoxon tests Rank distributions among items and rank parameters Results of Friedman and Wilcoxon tests Rank distribution among items and rank parameters R e s u lt s of Fr ie d m a n t e s t Rank distribution among items and rank parameters R e s u lt s of Fr ie d m a n t e s t Statistical testing procedure Self-perception of corporate managers in various areas of life S e l f- e v a lu at ion of m a n a g e r i a l s k i l l s Forecasts of market changes and stock price changes in 3 and 12 months with estimated probability of forecast realization Managerial predictions about market changes in short and long term Managerial predictions about their stock price in the short and the long term Di s t r ibut ion a nd si g n i f ic a nc e t e s t Main descriptive statistics of the tested variables Di s t r ibut ion of a n s we r s Distribution and significance tests Risk aversion and risk seeking depending on decision context Personal versus corporate loss aversion Distribution of answers to the question Distribution of answers to the question Di s t r ibut ion of a n s we r s to t he qu e s t ion 2 63