Market professionals with decades of experience typically argue that a call option is a surrogate for the underlying asset, indicating that they perceive the risk of a call option as similar to the risk of the underlying asset. Experimental evidence also points to the same conclusion. Such...

This paper dynamically extends the noise trading model (DSSW model) via describing the limited rational investors’ sentiment more specifically, and using the bipolar sigmoid activation function in the neural network system to depict noise traders’ overreaction to the past changes of...

As real-time news updates and analysis have become widely available, one has to rethink the effect of noise on news. Noise has the fundamental property of becoming dominant over short periods of time. As a result, many “breaking news” stories may appear more exciting and important that what...

We study stock market reactions to large international military conflicts since World War II. Using a news analysis proxy for the estimated likelihood that a conflict will result in a war, we find that an increase in the war likelihood tends to decrease stock prices, but the ultimate outbreak of...

This paper analyses financial crises from a theoretical point of view. For this it reviews what different schools of economic thought have to say about financial crises. It examines first the approaches that regard financial crises as a disturbing factor of a generally stable real economy...

This paper studies behavioral responses to taxes in financial markets. It is motivated by recent puzzling empirical evidence of taxable municipal bond yields significantly exceeding the level expected relative to tax exempt bonds. A behavioral explanation is a tax aversion bias, the phenomenon...

This paper uses laboratory experiments to provide a systematic analysis of how different presentation formats affect individuals' investment decisions. The results indicate that the type of presentation as well as personal characteristics influence both, the consistency of decisions and the...

We extend gender research on risk behavior to betting markets. Our data set consists of all 5,136,660 bets in New Zealand from 2006 to 2009 and allows assigning each bet to individ-ual bettors. Women are much more prone to the favorite-longshot bias and suffer higher losses. Usually, betting on...

Many studies on mutual funds have demonstrated the existence of herding behavior and positive feedback trading. However, most research has not examined the characteristics of herding behavior, but simply attempted to determine if herding behavior exists. These studies fail to probe into the...

This paper investigates the profile of the individual investor in warrants. It is concluded that the average investor in warrants has a greater level of financial literacy and a greater appetite for risk. It is also concluded that higher experience in stock trading and the investment in foreign...