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This study explores the nexus between investors’ sentiments and herding behavior toward the market consensus in the U.S. and Europe stock markets from January, 2005 to April, 2021. We document strong evidence of herding during periods characterized by high level of sentiments. Our results...
Persistent link: https://www.econbiz.de/10013492271
We show that the disposition effect–the tendency of investors to hold losers and sell winners–can be a source of overconfidence. We find experimental evidence that individuals update beliefs about their own investment ability based on realized gains and losses rather than the overall...
Persistent link: https://www.econbiz.de/10014358104
This paper proposes an Investor Sentiment Index for the European market and tests its predictability power over returns and volatility. The constructed Investor Sentiment Index for Europe draws upon three well-established and two recent individual sentiment proxies through a novel dynamic factor...
Persistent link: https://www.econbiz.de/10014349029
Behavioral finance, a field that combines the psychology of investors with economics and other social sciences, has gained huge popularity in the recent past due to the volatility and complexity of the stock market. Therefore, the aim of the study is to review the literature on behavioral...
Persistent link: https://www.econbiz.de/10014439371
This paper argues that the price-dividend ratio variability is explained in a large proportion by shocks affecting the subjective distribution of capital gain expectations: sentimental discount rate shocks affecting average beliefs explain at least 30\% and disagreement shocks up to 20\% of the...
Persistent link: https://www.econbiz.de/10014254872
Behavioral economics aspires to replace the agents of neoclassical economics with living, breathing human beings. Here, the author argues that behavioral economics, like its neoclassical counterpart, often neglects the role of active sense-making that motivates and guides much human behavior....
Persistent link: https://www.econbiz.de/10012130847
Behavioral economics characterizes decision-makers using psychologically-informed models. Cognitive science produces psychologically-informed models. Why don't these disciplines talk more? Here, the author presents several arguments for why cognitive science should inform behavioral economics -...
Persistent link: https://www.econbiz.de/10011976074
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