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Handbook of Behavioral Finance
The Handbook of Behavioral Finance is a comprehensive, topical and concise source of cutting-edge research on recent developments in behavioral finance.
More Information
Critical Acclaim
Contributors
Contents
More Information
The Handbook of Behavioral Finance is a comprehensive, topical and concise source of cutting-edge research on recent developments in behavioral finance.
The Handbook is divided into three areas of interest. The first – Behavioral Biases – includes discussions on herding in the market, information processing and the disposition effect in investment decisions. In the second section – Behavior in the Investment Process – topics explored include the effects of higher transaction costs on traders’ behavior, investor sentiment, overconfidence and active management, and behavior effects on forecasts. The final section – Global Behavior – looks at the effects of various aspects of behavioral finance in international markets including Malaysia, Finland, Australia and Brazil.
Consolidating a colossal amount of research into one volume, this Handbook will stimulate new interdisciplinary research for academics, build a body of knowledge about psychological influences on market behavior for finance students, and give practitioners a better understanding of psychological influences on the markets in order to improve investment decision making.
The Handbook is divided into three areas of interest. The first – Behavioral Biases – includes discussions on herding in the market, information processing and the disposition effect in investment decisions. In the second section – Behavior in the Investment Process – topics explored include the effects of higher transaction costs on traders’ behavior, investor sentiment, overconfidence and active management, and behavior effects on forecasts. The final section – Global Behavior – looks at the effects of various aspects of behavioral finance in international markets including Malaysia, Finland, Australia and Brazil.
Consolidating a colossal amount of research into one volume, this Handbook will stimulate new interdisciplinary research for academics, build a body of knowledge about psychological influences on market behavior for finance students, and give practitioners a better understanding of psychological influences on the markets in order to improve investment decision making.
Critical Acclaim
‘The Handbook of Behavioral Finance is a comprehensive source of cutting-edge research on recent developments in behavioral finance.’
– Long Range Planning
‘As suits the jointly academic and practitioner audience, the technical level is low without being facile. (The Handbook would be a suitable reference for a senior undergraduate or master’s level class in behavioral finance). Most chapters present simple econometric modelling of experimental, survey or revealed preference data. . . chapters are concise, coherent and clearly written.’
– Susan Thorp, Journal of Pension Economics and Finance
‘This book does an excellent job of presenting empirical evidence as to the role of selected psychological attributes on key investment behaviors and it should be valuable to investment professionals as a handbook. Professor Bruce has selected readings that clearly show that investors are more than logic machines. They have evolved brains which makes them susceptible to context and culture. The book wisely avoids making generalizations about a new behavioral financial paradigm which at this time is only in the early stages of development.’
– Robert A. Olsen, California State University, Chico, US
‘The breadth and depth of Professor Bruce’s knowledge of behavioral finance and its implications for, and applicability to, all facets of investment decisions makes him as qualified as anyone I know to produce this Handbook. Those who absorb the insights and knowledge that this Handbook offers will prosper. But without it, they will dull their competitive edge both as investors and as educators. I am actually jealous I did not produce this Handbook myself!’
– Arnold S. Wood, Martingale Asset Management, US
– Long Range Planning
‘As suits the jointly academic and practitioner audience, the technical level is low without being facile. (The Handbook would be a suitable reference for a senior undergraduate or master’s level class in behavioral finance). Most chapters present simple econometric modelling of experimental, survey or revealed preference data. . . chapters are concise, coherent and clearly written.’
– Susan Thorp, Journal of Pension Economics and Finance
‘This book does an excellent job of presenting empirical evidence as to the role of selected psychological attributes on key investment behaviors and it should be valuable to investment professionals as a handbook. Professor Bruce has selected readings that clearly show that investors are more than logic machines. They have evolved brains which makes them susceptible to context and culture. The book wisely avoids making generalizations about a new behavioral financial paradigm which at this time is only in the early stages of development.’
– Robert A. Olsen, California State University, Chico, US
‘The breadth and depth of Professor Bruce’s knowledge of behavioral finance and its implications for, and applicability to, all facets of investment decisions makes him as qualified as anyone I know to produce this Handbook. Those who absorb the insights and knowledge that this Handbook offers will prosper. But without it, they will dull their competitive edge both as investors and as educators. I am actually jealous I did not produce this Handbook myself!’
– Arnold S. Wood, Martingale Asset Management, US
Contributors
Contributors: L.F. Ackert, J. Agnew, K. Bachmann, T. Berry, N. Blasco, P. Calafiore, L.-L. Chong, B.K. Church, A.M. Cianci, P. Corredor, S.S. Culbertson, S. Davidson, K. Ely, T. Evans, D.M. Fazio, S. Ferreruela, S.O. Fogel, G. Francis, R. Garvey, C. Gort, T. Hens, D.C. Indro, H.J. Jeffrey, H. Kelley, E. Kirchler, M.-M. Lai, B. Lee, M. Lehenkari, B. Maciejovsky, J. Madura, A. Murphy, J. O’Brien, N. Okuyama, J. Perttunen, V. Ramiah, N. Richie, K. Sivaramakrishnan, G. Soydemir, L. Szykman, B.M. Tabak, S.-H. Tan, R. Verma, M. Wang, M. Weber, J. Yang, L. Zhu
Contents
Contents:
Preface
Introduction
Brian Bruce
PART I: BEHAVIORAL BIASES
1. Framing Effects, Selective Information and Market Behavior: An Experimental Analysis
Erich Kirchler, Boris Maciejovsky and Martin Weber
2. Information Overload and Information Presentation in Financial Decision Making
Julie Agnew and Lisa Szykman
3. Revealing the Information Content of Investment Decisions
Noriyuki Okuyama and Gavin Francis
4. The Disposition Effect and Individual Investor Decisions: The Roles of Regret and Counterfactual Alternatives
Suzanne O’Curry Fogel and Thomas Berry
5. Overreaction of Exchange-Traded Funds During the Bubble of 1998–2002
Jeff Madura and Nivine Richie
6. Intentional Herding in Stock Markets: An Alternate Approach in an International Context
Natividad Blasco, Pilar Corredor and Sandra Ferreruela
7. Psychic Distance in the Eight-year Crisis: An Empirical Study
Lili Zhu and Jiawen Yang
PART II: BEHAVIOR IN THE INVESTMENT PROCESS
8. The Effects of Higher Transaction Costs on Trader Behavior
Ryan Garvey and Anthony Murphy
9. Homo Communitatis: A Rigorous Foundation for Behavioral Finance
H. Joel Jeffrey
10. Does Mutual Fund Flow Reflect Investor Sentiment?
Daniel C. Indro
11. The Impact of Motivational and Cognitive Factors on Optimistic Earnings Forecasts
Anna M. Cianci and Satoris S. Culbertson
12. Overconfidence and Active Management
Christoph Gort and Mei Wang
13. Availability Heuristic and Observed Bias in Growth Forecasts: Evidence from an Analysis of Multiple Business Cycles
Byunghwan Lee, John O’Brien and K. Sivaramakrishnan
14. Weak and Strong Individual Forecasts: Additional Experimental Evidence
Lucy F. Ackert, Bryan K. Church and Kirsten Ely
15. Behavioral Finance and Investment Advice
Kremena Bachmann and Thorsten Hens
PART III: GLOBAL BEHAVIOR
16. Measuring the Impact of Behavioral Traders in the Market for Closed-end Country Funds from 2002 to 2009
Hugh Kelley and Tom Evans
17. Holding on to the Losers: Finnish Evidence
Mirjam Lehenkari and Jukka Perttunen
18. The Impact of Business and Consumer Sentiment on Stock Market Returns: Evidence from Brazil
Pablo Calafiore, Gökçe Soydemir and Rahul Verma
19. The Information-Adjusted Noise Model: Theory and Evidence from the Australian Stock Market
Sinclair Davidson and Vikash Ramiah
20. Ambiguity Aversion and Illusion of Control in an Emerging Market: Are Individuals Subject to Behavioral Biases?
Benjamin Miranda Tabak and Dimas Mateus Fazio
21. Behavioral Finance in Malaysia
Ming-Ming Lai, Lee-Lee Chong and Siow-Hooi Tan
Index
Preface
Introduction
Brian Bruce
PART I: BEHAVIORAL BIASES
1. Framing Effects, Selective Information and Market Behavior: An Experimental Analysis
Erich Kirchler, Boris Maciejovsky and Martin Weber
2. Information Overload and Information Presentation in Financial Decision Making
Julie Agnew and Lisa Szykman
3. Revealing the Information Content of Investment Decisions
Noriyuki Okuyama and Gavin Francis
4. The Disposition Effect and Individual Investor Decisions: The Roles of Regret and Counterfactual Alternatives
Suzanne O’Curry Fogel and Thomas Berry
5. Overreaction of Exchange-Traded Funds During the Bubble of 1998–2002
Jeff Madura and Nivine Richie
6. Intentional Herding in Stock Markets: An Alternate Approach in an International Context
Natividad Blasco, Pilar Corredor and Sandra Ferreruela
7. Psychic Distance in the Eight-year Crisis: An Empirical Study
Lili Zhu and Jiawen Yang
PART II: BEHAVIOR IN THE INVESTMENT PROCESS
8. The Effects of Higher Transaction Costs on Trader Behavior
Ryan Garvey and Anthony Murphy
9. Homo Communitatis: A Rigorous Foundation for Behavioral Finance
H. Joel Jeffrey
10. Does Mutual Fund Flow Reflect Investor Sentiment?
Daniel C. Indro
11. The Impact of Motivational and Cognitive Factors on Optimistic Earnings Forecasts
Anna M. Cianci and Satoris S. Culbertson
12. Overconfidence and Active Management
Christoph Gort and Mei Wang
13. Availability Heuristic and Observed Bias in Growth Forecasts: Evidence from an Analysis of Multiple Business Cycles
Byunghwan Lee, John O’Brien and K. Sivaramakrishnan
14. Weak and Strong Individual Forecasts: Additional Experimental Evidence
Lucy F. Ackert, Bryan K. Church and Kirsten Ely
15. Behavioral Finance and Investment Advice
Kremena Bachmann and Thorsten Hens
PART III: GLOBAL BEHAVIOR
16. Measuring the Impact of Behavioral Traders in the Market for Closed-end Country Funds from 2002 to 2009
Hugh Kelley and Tom Evans
17. Holding on to the Losers: Finnish Evidence
Mirjam Lehenkari and Jukka Perttunen
18. The Impact of Business and Consumer Sentiment on Stock Market Returns: Evidence from Brazil
Pablo Calafiore, Gökçe Soydemir and Rahul Verma
19. The Information-Adjusted Noise Model: Theory and Evidence from the Australian Stock Market
Sinclair Davidson and Vikash Ramiah
20. Ambiguity Aversion and Illusion of Control in an Emerging Market: Are Individuals Subject to Behavioral Biases?
Benjamin Miranda Tabak and Dimas Mateus Fazio
21. Behavioral Finance in Malaysia
Ming-Ming Lai, Lee-Lee Chong and Siow-Hooi Tan
Index
