Behavioral Finance and Efficient Markets: What does the Euro Crisis Tell us?

Bird, Graham; Du, Wenti; Willett, Thomas D.

doi:10.1007/s11079-017-9436-1

Cited by 17 publications

(10 citation statements)

References 43 publications

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“…Consistent with the behavioural finance approach (see, e.g. Bird, Du, & Willett, ), during the first crisis both the 5 and 15‐day windows show higher correlations during periods when the risk premium in Greece was rising than when it was falling (with the exception of Portugal). The differences are fairly substantial with most differences in the range of 0.06 to 0.08 against average correlations in the range of 0.3 to 0.4 for the crisis countries.…”

Section: Results Discussion and Interpretationsupporting

confidence: 57%

Was it different the second time? An empirical analysis of contagion during the crises in Greece 2009–15

Bird

Pentecost

et al. 2017

World Economy

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Over the period between end‐2009 and end‐2015, Greece experienced two discernible financial crises. This paper undertakes a correlation analysis of risk premia to investigate the nature and extent of contagion from these crises to other selected Eurozone countries. A commonly expressed view is that the effects of the second crisis were more muted since the systemic risks were seen by markets as being lower. However, using a rolling correlation model, a Dynamic Conditional Correlation GARCH (DCC‐GARCH) model and a t‐copula model we find that this is not the case. Broadly speaking, the contagion effects of the second crisis were at least as large as those associated with the first one.

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Section: Results Discussion and Interpretationsupporting

confidence: 57%

Was it different the second time? An empirical analysis of contagion during the crises in Greece 2009–15

Bird

Pentecost

et al. 2017

World Economy

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“…Many researchers studied the historical development of behavioural finance and its future research direction (Huang et al, 2016;Yang, 2016). Other important issues are devoted to the aspects of market investment behaviour (Khashanab and Alsulaiman, 2016), to the approaches that are helpful when trying to understand how financial markets perform (Bird et al, 2017) or to heuristic and biases in managerial decision-making under the risk (Houdek and Koblovsky, 2014).…”

Section: Literature Reviewmentioning

confidence: 99%

Behavioural Aspects of the Financial Decision-Making

2019

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Background and Purpose: Behavioural finance is a relatively new, but rapidly evolving field that provides explanations of an economic decision-making by cognitive psychology, conventional economic and financial theory. Behavioural finance searches the influence of psychology on the behaviour of financial practitioners and the subsequent effects on the financial markets. The purpose of the paper is the research on behavioural aspects of financial decision-making as they help explain why and how markets might be inefficient. Design/Methodology/Approach: Fuzzy logic is an excellent tool for working with linguistic variables that are often found when working with behavioural data. Thus, we analyse the financial decision-making process from the perspective of behavioural finance aimed at better understanding of the decision-making process of investors applying the principles of fuzzy logic to solve various financial problems. Results: The results of the study indicate that fuzzy logic is applicable when solving problems of financial management and financial decision-making problems. The urgency of the fuzzy logic application for managerial and financial decisions should be emphasized. Research in this area indicates that in some cases, as in the case of behavioural financing, the use of fuzzy logic is far more suitable than the use of other methods (Peters, Aguiar and Sales). Conclusion: The novelty of the paper is to extend the application of fuzzy sets in the area of financial decision-making. The paper demonstrates that despite the fact, that fuzzy logic is currently used mainly in technical directions, it is applicable also in financial management, especially, in cases where it is necessary to consider the influence of human and the occurrence of linguistic variables.

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“…where j DUM is a country-specific (0, 1) dummy which takes the value of unity when the country risk premium exceeds one standard deviation of its mean and zero otherwise. The ρ exv jt series were then compared to actual news events (see Bird et al, 2017b) over the core period of the sample. There are about eighty identified important news events (see Table 5 of the online Appendix for ( )…”

Section: The Datamentioning

confidence: 99%

Contagion from the crises in the Euro-zone: where, when and why?

Pentecost

Bird

et al. 2019

The European Journal of Finance

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The prevalence of contagion between the Euro-zone countries and other European countries since the Greek crisis of 2009 is now well-known, but the factors that influence the pattern of this contagion are not well understood. We investigate this question both within Europe and beyond to the USA and Japan, using an asymmetric M-GARCH model that focuses on extreme values of the risk premia on government bonds. We compare these extreme values with news of major events and find that they are highly correlated. We find a different pattern of contagion emanating from Ireland compared to the other crisis countries of Greece, Italy, Portugal and Spain. We also examine the factors that have made countries vulnerable to contagion and find that financial factors are more important than trade ones. However, intra-Euro-zone trade has also been a significant factor between the major Euro-zone economies. There is little evidence that global factors affect contagion between EU member states, but some evidence that nominal exchange rate movements offer a degree of insulation from contagion for the non-Euro zone states.

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Behavioral Finance and Efficient Markets: What does the Euro Crisis Tell us?

Cited by 17 publications

References 43 publications

Was it different the second time? An empirical analysis of contagion during the crises in Greece 2009–15

Was it different the second time? An empirical analysis of contagion during the crises in Greece 2009–15

Behavioural Aspects of the Financial Decision-Making

Contagion from the crises in the Euro-zone: where, when and why?

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