The following paper is a theoretical introduction of the misinformation effect to behavioural finance. The misinformation effect causes a memory report regarding an event or particular knowledge to become contaminated with misleading information from another source. The paper aims to describe...

The present paper reviews two fundamental investing paradigms, which have had a substantial impact on the manner investors tend to develop their own strategies. specifically, the study elaborates on efficient market hypothesis (emh), which, despite remaining most prominent and popular until the...

Karlsson, Loewenstein and Seppi (2009) found that, following market downswings, investors are less likely to login to monitor their retirement portfolios. They concluded that, rather like (apocryphal) ostriches sticking their heads in the sand, investors avoid unpleasant information by reducing...

This paper provides the first evidence for empirical tests of the effect of rational expectations as well as behavioral biases, including among other animal spirits such as defined by Akerlof and Shiller (2009) on the variability of trading.We have used daily data for five international capital...

A number of studies have used survey data on traders' exchange rate forecasts to examine the role of risk and non-REH forecasting in accounting for excess returns in currency markets. This work re-examines those results using an alternative estimation technique, the Cointegrated VAR, which...

We investigate the validity of purchasing power parity of 7 Middle East countries over January 1980 to August 2008 by applying the stationary test with a nonlinear Fourier function as proposed by Becker et al. (2006). This test allows us to study the presence of unknown smooth structural breaks...

We survey 84 finance and accounting majors to determine the behavioral factors that males and females exhibit when making investment decisions. The survey results are linked to student performance in the Stock-Trak Global Portfolio Trading Simulation. We find that males and females exhibit...

Limits to arbitrage play a central role in behavioral finance. They are thought to interfere with arbitrage processes so that security prices can deviate from true values for extended periods of time. We describe a recent financial innovation that allows limits to arbitrage to be sidestepped,...

Minimum capital requirements are a central tool of banking regulation. Setting them balances a number of factors, including any effects on the cost of capital and in turn the rates available to borrowers. Standard theory predicts that, in perfect and efficient capital markets, reducing banks'...

A basic tenet of financial economics is that asset prices change in response to unexpected fundamental information. Since Roll's (1988) provocative presidential address that showed little relation between stock prices and news, however, the finance literature has had limited success reversing...