Behavioral finance: insights from experiments II: biases, moods and emotions

Duxbury, Darren

doi:10.1108/rbf-09-2015-0037

Cited by 49 publications

(33 citation statements)

References 141 publications

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“…Again in the context of portfolio decisions, Brown and Kagel (2009) note that their experimental design allows them to investigate behavior while controlling for the confounding effects of tax incentives, agency problems, transaction costs etc.. Perhaps the most potent weapon at the hands of the experimenter is the ability to manipulate the levels of treatment factors thus allowing causal tests of the relationship between variables of theoretical interest, and so moving beyond the correlational analysis possible in studies based on proxies of unobserved behavior. As will be seen in the companion paper, Duxbury (2015), this has been particularly enlightening in studies of the effect of overconfidence on financial behavior.…”

Section: Introductionmentioning

confidence: 90%

“…The aim, here and in a companion paper (Duxbury, 2015), is to review the insights provided by experimental studies examining financial decisions and market behaviour.…”

Section: Purposementioning

confidence: 99%

“…Behavioral finance draws on a long standing tradition of experimentation in economics and psychology to motivate its behavioral models and empirical analyses. Over the course of a twopaper review, see Duxbury (2015) for the companion paper, we document the valuable contribution made by experimental studies in extending our knowledge of the functioning of financial markets and the financial behavior of individuals. The vast and growing number of such experiments, necessitates selectivity.…”

Section: Introductionmentioning

confidence: 99%

“…

Newcastle University ePrints -eprint.ncl.ac.uk Duxbury D. Behavioral finance: insights from experiments I: theory and financial markets. Review of Behavioral Finance 2015, 7(1), 78-96.

Abstract

PurposeThe aim, here and in a companion paper (Duxbury, 2015), is to review the insights provided by experimental studies examining financial decisions and market behaviour.

Design/methodology/approachFocus is directed on those studies examining explicitly, or with direct implications for, the most robustly identified phenomena or stylized facts observed in behavioral finance. The themes for this first paper are theory and financial markets.

FindingsExperiments complement the findings from empirical studies in behavioral finance by avoiding some of the limitations or assumptions implicit in such studies.

Originality/valueWe synthesize the valuable contribution made by experimental studies in extending our knowledge of the functioning of financial markets and the financial behavior of individuals.

…”

mentioning

confidence: 99%

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Behavioral finance: insights from experiments I: theory and financial markets

Duxbury

2015

Review of Behavioral Finance

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Newcastle University ePrints -eprint.ncl.ac.uk Duxbury D. Behavioral finance: insights from experiments I: theory and financial markets. Review of Behavioral Finance 2015, 7(1), 78-96. Abstract PurposeThe aim, here and in a companion paper (Duxbury, 2015), is to review the insights provided by experimental studies examining financial decisions and market behaviour. Design/methodology/approachFocus is directed on those studies examining explicitly, or with direct implications for, the most robustly identified phenomena or stylized facts observed in behavioral finance. The themes for this first paper are theory and financial markets. FindingsExperiments complement the findings from empirical studies in behavioral finance by avoiding some of the limitations or assumptions implicit in such studies. Originality/valueWe synthesize the valuable contribution made by experimental studies in extending our knowledge of the functioning of financial markets and the financial behavior of individuals.

show abstract

Section: Introductionmentioning

confidence: 90%

“…The aim, here and in a companion paper (Duxbury, 2015), is to review the insights provided by experimental studies examining financial decisions and market behaviour.…”

Section: Purposementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

“…

Newcastle University ePrints -eprint.ncl.ac.uk Duxbury D. Behavioral finance: insights from experiments I: theory and financial markets. Review of Behavioral Finance 2015, 7(1), 78-96.

Abstract

PurposeThe aim, here and in a companion paper (Duxbury, 2015), is to review the insights provided by experimental studies examining financial decisions and market behaviour.

FindingsExperiments complement the findings from empirical studies in behavioral finance by avoiding some of the limitations or assumptions implicit in such studies.

Originality/valueWe synthesize the valuable contribution made by experimental studies in extending our knowledge of the functioning of financial markets and the financial behavior of individuals.

…”

mentioning

confidence: 99%

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Behavioral finance: insights from experiments I: theory and financial markets

Duxbury

2015

Review of Behavioral Finance

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“…The third approach to approximate the level of a CEO's overconfidence is to measure the volatilities of the price and trading volume of a company's shares [12]. It is assumed that an overconfident CEO can attract shortterm investors and noise traders who are willing to accept higher risks.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Overconfident CEOs Pay More to Shareholders? Evidence from the US Market

Anilov

2019

КФ

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This paper aims to discover evidence on the possible impact of CEO overconfidence on payout policy, and the role ofcorporate boards in offsetting the possible negative effects of this overconfidence. Our investigation demonstrates theeffect of overconfidence on the choice of payout method, specifically regarding the repurchases-dividends mix. Wealso evaluate the ability of corporate governance mechanisms to reduce or even eliminate the negative effects of CEObehavior on payout decisions.This study is conducted using a sample of 671 non-financial companies from the US for the period of 2007–2016. Weapply probit regressions to study different aspects of payout decisions, and use a panel GMM estimator to check forpossible endogenous effects. Using a corporate governance quality index, we test the ability of boards of directors toreduce negative effects of CEO’s overconfidence on the payout decisions.Our findings confirm the hypothesis that overconfident CEOs tend to increase the levels of payout in the form ofrepurchases, while the levels of cash dividends are unaffected by this type of CEO behavior. Moreover, an overconfidentCEO is more likely to initiate repurchases if this has not been done already. The results further illustrate thatoverconfident CEOs not only pursue higher levels of repurchases, but also switch more often from cash dividends torepurchases. However, it is also shown, in contract to previous research in the field, that efficient boards of directors havevery limited power in eliminating the negative effects of CEO overconfidence.This paper contributes to the existing literature by analyzing the specific area of CEO overconfidence using data fromthe United States, and follows specific lines of inquiry which have not been deeply studied. Further possibilities toexplore the implications of this research exists particularly in the consideration of its apparent contradiction of previousresearch. There is yet scope to determine applicable tools of reducing the negative effects of specific CEO behaviors. It ispossible to identify and investigate other relevant behavioral characteristics that may influence payout decisions. Further,these characteristics may be evaluated to see if the operation of these interrelations reproduce alternative results in termsof the effect of corporate governance, both in the US and in other markets.

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A new hedging hypothesis regarding prediction interval formation in stock price forecasting

Zhu

Wang

Goddard

2021

Journal of Forecasting

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We propose and test a simple hedging hypothesis for prediction interval formation in stock price forecasting. In the presence of uncertainty, forecasters hedge their forecasts by adjusting the bounds of the prediction interval in a way that reflects their forecast of the average forecast of others. This hypothesis suggests a positive relationship between the belief wedge, defined as the difference between the subject's forecast of the average forecast of others and the subject's own point forecast, and the asymmetry of the prediction interval. Empirical support for the hedging hypothesis is drawn from two in‐class surveys, an experiment, and a large survey of professional analysts' forecasts of future stock prices.

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Behavioral finance: insights from experiments II: biases, moods and emotions

Abstract: This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License Newcastle University ePrints-eprint.ncl.ac.uk Duxbury D. Behavioral finance: insights from experiments II: biases, moods and emotions. Review of Behavioral Finance 2015, 7(2), 151-175.

Cited by 49 publications

References 141 publications

Behavioral finance: insights from experiments I: theory and financial markets

Behavioral finance: insights from experiments I: theory and financial markets

Do Overconfident CEOs Pay More to Shareholders? Evidence from the US Market

A new hedging hypothesis regarding prediction interval formation in stock price forecasting

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