Impact of risk aversion and belief heterogeneity on trading of defaultable claims

Research on the Influence of Heterogeneous Beliefs and Media Reports on Investor Behavior from the Perspective of Informationization

“…Investors' complex psychological changes such as heterogeneous beliefs and other factors always affect investors' decision-making behavior. Kim J, Leung T. (2016) [5] found that the key to triggering a transaction is mainly the heterogeneity of investor beliefs, not the difference in risk aversion. Behavioral economists Terence Odin and Brad Barber believe that the stock market environment facing investors will get worse and worse, because the massive amount of information on the Internet will allow investors to easily anchor information that supports their predictions, prompting investors to form excessive self-confidence, not being cautious, leading to irrational behavior.…”

Option implied ambiguity and its information content: Evidence from the subprime crisis

“…The CBOE's VIX index, IV and other options market information can be used to gauge market fear, serving as good examples of how to take stock of the informational efficiency of options markets and exploit interactions between derivative and primitive asset transactions. However, although providing relevant insights with respect to investors' expectations and risk aversion (Jackwerth 2000;Poteshman 2001;Kim and Leung 2014), these tools do not adequately explain investment behavior under severe uncertainty, ignorance or ambiguity conditions (Feldman 2007;Montesano 2008;Stiglitz 2011). Swings in investor opinions and market sentiment which normally occur around financial crashes or major economic shocks are not fully captured by standard options markets indicators.…”