Investor psychology in capital markets: Evidence and policy implications

Journal of Monetary Economics

Volumn 49, Issue 1, 2002, Pages 139-209

  Daniel, Kent ^a,b   Hirshleifer, David ^c   Teoh, Siew Hong ^c  

^a NORTHWESTERN UNIVERSITY   (United States)

^b NATIONAL BUREAU OF ECONOMIC RESEARCH   (United States)

^c OHIO STATE UNIVERSITY   (United States)

Author keywords

Accounting regulation; Behavioral economics; Behavioral finance; Capital markets; Disclosure; Investor psychology; Market efficiency; Policy

Indexed keywords

EID: 0036145215     PISSN: 03043932     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0304-3932(01)00091-5     Document Type: Article

References (419)

1. Do analysts' earnings forecasts incorporate information in prior stock price changes?
2. Analysts' overreaction/underreaction to earnings information as an explanation for anomalous stock price behavior
3. Fundamental analysis, future earnings, and stock prices
4. Abnormal returns to a fundamental strategy
5. An exploration of the effects of pessimism and doubt on asset returns
6. The value-relevance of intangibles: The case of software capitalization
7. Forecasts of earnings per share: Possible sources of analyst superiority and bias
8. Accruals and future returns: Tests of the naive investor hypothesis
9. The market valuation of accounting information: The case of postretirement benefits other than pensions
10. Accounting recognition and the determinants of pension asset allocation
11. Recognition, disclosure, or delay: Timing the adoption of SFAS no. 106
12. Do appearances matter? the impact of EPS accretion and dilution on stock prices
13. Cognitive changes induced by accounting changes: Experimental evidence on the functional fixation hypothesis
14. An empirical investigation of short interest
15. Identifying investor sentiment from price paths: The case of football betting
16. Do firms purchase the pooling method
17. A behavioral economic analysis of mandatory disclosure: A thought experiment turned cautionary tale
18. The equity share in new issues and aggregate stock returns
19. Market timing and capital structure
20. Anomalies in relationships between securities' yields and yield-surrogates
21. How naive is the stock market's use of earnings information?
22. An empirical evaluation of accounting income numbers
23. Security returns around earnings announcements
24. Non-stationary expected returns: Implications for tests of market efficiency and serial correlations of returns
25. Problems in measuring portfolio performance: An application to contrarian investment strategies
26. A simple model of herd behavior
27. The relationship between return and the market value of common stocks
28. Can investors profit from the prophets? consensus analyst recommendations and stock returns
29. Online investors: Do the slow die first?
30. Trading is hazardous to your wealth: The common stock investment performance of individual investors
31. Boys will be boys: Gender, overconfidence, and common stock investment
32. Detecting long-run abnormal stock returns: The empirical power and specification of test statistics
33. A model of investor sentiment
34. Prospect theory and asset prices
35. Price discovery in American and British property markets
36. Price discovery and efficiency in the UK housing market
37. Does the use of financial derivatives affect earning management decisions?
38. The rewards to meeting or beating earnings expectations
39. Investor sophistication and patterns in stock returns after earnings announcements
40. Interperiod tax allocation and delta depreciation methods: Some empirical results
41. Is there information in an earnings announcement delay?
42. Peso problem explanations for term structure anomalies
43. Excessive extrapolation and the allocation of 401(k) accounts to company stock
44. Naive diversification strategies in retirement saving plans
45. A request for more research to support financial accounting standard setting
46. A critique of size related anomalies
47. A view of the current status of the size anomaly
48. Accounting-based stock price anomalies: Separating market inefficiencies from risk
49. Post-earnings-announcement drift: Delayed price response or risk premium?
50. Evidence that stock prices do not fully reflect the implications of current earnings for future earnings
51. Macromomentum: Evidence of predictability in international equity markets
52. Accounting methods and management decisions: The case of inventory costing and inventory policy
53. Analyst forecast errors and stock price behavior near the earnings announcement dates of LIFO adopters
54. A theory of fads, fashion, custom, and cultural change as informational cascades
55. Herd behavior in financial markets: A review
56. Quotes, prices and estimates of value in a laboratory market
57. Confidence and the welfare of less-informed investors
58. Underreactions, overreactions and moderated confidence
59. The asset structure of individual portfolios with some implications for utility functions
60. Closed-end country funds and U.S. market sentiment
61. Martingale restrictions on equilibrium prices of Arrow-Debreu securities under rational expectations and consistent beliefs
62. Implementing statistical criteria to select return forecasting models: What do we learn?
63. Prices and allocations in financial markets: Theory and evidence
64. Earnings quality and financial reporting credibility: An empirical investigation
65. Is the abnormal return following equity issuances anomalous?
66. Alternative factor specifications, security characteristics and the cross-section of expected stock returns
67. The individual investor
68. Stock prices and the supply of information
69. Investment analysis and the adjustment of stock prices to common information
70. Of tournaments and temptations: An analysis of managerial incentives in the mutual fund industry
71. A temporal analysis of earnings surprise: Profits versus losses
72. Univariate time series models of quarterly accounting earnings per share: A proposed model
73. Survival
74. Earnings management to avoid earnings decreases and losses
75. Time-series properties and pricing of special items component of earnings
76. Individual decision making
77. Bounded rationality in individual decision making
78. Information mirages in experimental asset markets
79. Stock returns and the term structure
80. Consumption and the stock market: Interpreting the international evidence
81. Asset pricing at the millenium
82. By force of habit: A consumption based explanation of aggregate stock market behavior
83. The dividend-price ratio and expectations of future dividends and discount factors
84. Yield spreads and interest rates: A bird's eye view
85. Analysts' forecasts of German firms' earnings: A comparative analysis abstract
86. On persistence in mutual fund performance
87. The behavior of home buyers in boom and post-boom markets
88. Asset pricing with distorted beliefs: Are equity returns too good to be true?
89. Timeliness of reporting and the stock price reaction to earnings announcements
90. On the contrarian investment strategy
91. Structural and return characteristics of small and large firms
92. Profitability of momentum strategies in the international equity markets
93. Earnings quality and stock returns: The evidence from accruals
94. Momentum strategies
95. The stock market valuation of research and development expenditures
96. Stock price reactions to news and no-news
97. Investing with a stock valuation model
98. Can the intertemporal CAPM explain the cross-section of stock returns
99. The 1993 tax rate increase and deferred tax adjustments: A test of functional fixation
100. Risk and return of value stocks
101. Risk taking by mutual funds as a response to incentives
102. Business fixed investment and bubbles: The Japanese case
103. Do foreign investors destabilize stock markets? The Korean experience in 1997
104. Does the internet increase trading? Evidence from investor behavior in 401(k) plans
105. Measuring abnormal performance: Do stocks overreact?
106. Momentum, legal systems and owner-ship structure: An analysis of Asian stock markets
107. Production based asset pricing and the link between stock returns and macroeconomic fluctuations
108. Market failure and the economic case for a mandatory disclosure system
109. Errors in estimating accruals: Implications for empirical research
110. Habit formation: A resolution of the equity premium puzzle
111. Home bias in equity portfolios, inflation hedging, and international capital market equilibrium
112. A new look at dissonance theory
113. A Rose.com by any other name
114. The parent company puzzle: When is the whole worth less than one of its parts?
115. Are financial markets overly optimistic about the prospects of firms that issue equity? Evidence from voluntary versus involuntary equity issuance by banks
116. Home bias at home: Local equity preference in domestic portfolios
117. The geography of investment: Informed trading and asset prices
118. What moves stock prices?
119. Speculative dynamics
120. Investor psychology and security market under-and over-reactions
121. Discriminating between efficient and inefficient markets theories of cross-sectional return predictability
122. Overconfidence, arbitrage, and equilibrium asset pricing
123. Evidence on the characteristics of cross-sectional variation in common stock returns
124. Market efficiency in an irrational world
125. Market reactions to tangible and intangible information
126. Cross-sectional variation in common stock returns in Japan
127. A positive model of earnings forecasts: Top down versus bottom up
128. Financial disclosure policy in an entry game
129. Earnings predictability and bias in analysts' earnings forecasts
130. Does the stock market overreact?
131. Further evidence on investor overreaction and stock market seasonality
132. Do security analysts overreact?
133. Financial decision-making in markets and firms: A behavioral perspective
134. An empirical assessment of the residual income valuation model
135. The relation between analysts' long-term earnings growth forecasts and stock price performance following equity offerings
136. Short-sellers, fundamental analysis and stock returns
137. Returns to contrarian investment strategies: Tests of naive expectations hypotheses
138. Earnings manipulations to exceed thresholds
139. Noise trader risk in financial markets
140. Positive feed-back investment strategies and destabilizing rational speculation
141. The survival of noise traders in financial markets
142. Is the market surprised by poor earnings realizations following seasoned equity offerings?
143. Rational herding in financial economics
144. Optimal release of information by firms
145. Is the risk of bankruptcy a systematic risk?
146. The long-run stock returns following bond ratings changes
147. Market efficiency, bounded rationally and supplemental business reporting disclosures
148. Closed-end funds: A survey
149. Why do firms repurchase stock
150. Equity undervaluation and decisions related to repurchase tender offers: An empirical investigation
151. The effect of investment banking relationships on financial analysts' earnings forecasts and investment recommendations
152. An investigation of the effects of expensing research and development costs on security prices
153. Disclosure of nonproprietary information
154. The association between trading recommendations and broker-analysts' earnings forecasts
155. Inefficiency in analysts' earnings forecasts: Systematic misreaction or systematic optimism?
156. Aggregate accounting earnings can explain most of security returns
157. Seasoned public offerings: Resolution of the 'new issues puzzle'
158. Leverage, liquidity, and long-run IPO returns
159. Overconfidence in judgment
160. Professional expectations: Accuracy and diagnosis of errors
161. New public offerings, information, and investor rationality: The case of publicly offered commodity funds
162. The forward discount anomaly and the risk premium: A survey of recent evidence
163. Substitution, risk aversion, and the temporal behavior of consumption growth and asset returns I: A theoretical framework
164. Substitution, risk aversion, and the temporal behavior of consumption growth and asset returns II: An empirical analysis
165. Events that shook the market
166. Efficient capital markets: A review of theory and empirical work
167. Efficient capital markets II
168. Market efficiency, long-term returns and behavioral finance
169. The information in long-maturity forward rates
170. Permanent and temporary components of stock prices
171. Business conditions and expected returns on stocks and bonds
172. Common risk factors in the returns on stocks and bonds
173. Size and book-to-market factors in earnings and returns
174. Multifactor explanations of asset pricing anomalies
175. Value versus growth: The international evidence
176. The equity premium
177. Voluntary financial disclosure in an entry game with continua of types
178. Predicting contemporary volume with historic volume at differential price levels: Evidence supporting the disposition effect
179. Earnings releases, anomalies, and the behavior of security returns
180. Accounting valuation, market expectation, and the book-to-market effect
181. Accounting diversity and international valuation
182. The multiperiod information content of accounting earnings: Confirmations and contradictions of previous earnings reports
183. How are stock prices affected by the location of trade?
184. Tulipmania
185. Do stock prices incorporate the potential dilution of employee stock options?
186. Loss aversion and seller behavior: Evidence from the housing market
187. A new historical database for the NYSE 1815 to 1925: Performance and predictability
188. The really long-run performance of initial public offerings: The pre-Nasdaq evidence
189. The myth of predictability: Does the dividend yield forecast the equity premium?
190. Herding among investment newsletters: Theory and evidence
191. Momentum investing and business cycle risk: Evidence from pole to pole
192. Book-to-market equity, distress risk, and stock returns
193. Disposition effect and momentum profit
194. The investment behavior and performance of various investor types: A study of Finland's unique data set
195. How distance, language and culture influence stock holdings and trades
196. What makes investors trade?
197. The cross-section of expected returns and its relation to past returns: New evidence
198. Portfolio performance evaluation: Old issues and new insights
199. Performance measurement without benchmarks: An examination of mutual fund returns
200. Momentum investment strategies, portfolio performance, and herding: A study of mutual fund behavior
201. The informational role of warranties and private disclosure about product quality
202. Understanding the nature of the risks and the source of the rewards to momentum investing
203. What does the stock market tell us about real estate returns?
204. 1974 LIFO excess stock return and analyst forecast error anomalies revisited
205. Insubstance defeasances: Security price reaction and motivations
206. A test of the extended functional fixation hypothesis
207. Extended functional fixation and security returns around earnings announcements: A reply to Ball and Kothari
208. Robust permanent income and pricing
209. Taking behavioralism seriously: Some evidence of market manipulation
210. Commonality in the determinants of expected stock returns
211. Timeliness of annual report releases and market reaction to earnings announcements in an emerging capital market: The case of China
212. On the predictability of common stock returns: World-wide evidence
213. Security Market Imperfections in World Wide Equity Markets
214. The impact of trading commission incentives on analysts' stock coverage decisions and earnings forecasts
215. The association between auditor litigation and abnormal accruals
216. Investor psychology and asset pricing
217. On the survival of overconfident traders in a competitive security market
218. Good day sunshine: Stock returns and the weather
219. The private and social-value of information and the reward to inventive activity
220. Information quality and market efficiency
221. SEC market risk disclosures: Implications for judgment and decision making
222. Dividend yields and expected stock returns: Alternative procedures for inference and measurement
223. An international dynamic asset pricing model
224. The prediction of stock returns using financial statement information
225. Social interactions and stock market participation
226. Bad news travels slowly: Size, analyst coverage and the profitability of momentum strategies
227. A unified theory of underreaction, momentum trading and overreaction in asset markets
228. The effect of financial statement classification of hybrid financial instruments on financial analysts' stock price judgments
229. Purchase, pooling; and equity analysts' valuation judgements
230. Familiarity breeds investment
231. Contagious speculation and a cure for cancer
232. The LIFO/FIFO choice: An asymmetric information approach; discussion
233. The relation between securities' firms mutual fund holdings and their analysts' forecasts bias
234. The performance of investment newsletters
235. Truth in mutual fund advertising: Evidence on future performance and fund flows
236. Long-run performance of seasoned equity offerings: Benchmark errors and biases in expectations
237. Returns to buying winners and selling losers: Implications for stock market efficiency
238. Overreaction, delayed reaction, and contrarian profits
239. Profitability of momentum strategies: An evaluation of alternative explanations
240. The relation between accounting goodwill numbers and equity values
241. Seasoned equity offerings, overvaluation and timing
242. The changing face of corporate governance and its impact on CEO compensation and firm performance
243. Evidence that capital markets learn from academic research: Earnings surprises and the persistence of post-announcement drift
244. Quarterly earnings reports and intermediate stock price trends
245. Losing sleep at the market: The daylight-savings anomaly
246. Winter blues: Seasonal affective disorder (SAD), the January effect, and stock market returns
247. The underreaction hypothesis and the new issue puzzle: Evidence from Japan
248. Are financial analysts' forecasts of corporate profits rational?
249. Stock market regularities: A synthesis of the evidence and explanations
250. Predicting returns in the stock and bond markets
251. Broker-analysts' trade-boosting incentives and their earnings forecast bias
252. Investor reaction to salient news in closed-end country funds
253. The effect of information releases on the pricing and timing of equity issues
254. Capital market research in accounting
255. Implications of data restrictions on performance measurement and tests of rational pricing
256. Book-to-market, dividend yield, and expected market returns: A time-series analysis
257. Measuring long-horizon security price performance
258. The information content of analyst stock recommendations
259. Further tests of the separation theorem and the capital asset pricing model
260. Experimental tests of the mean-variance model for portfolio selection
261. Experimental tests of the separation theorem and the capital asset pricing model
262. A model of probabilistic category learning
263. Equilibrium welfare and government policy with quasi-geometric discounting
264. Availability cascades and risk regulation
265. Speculation duopoly with agreement to disagree: Can overconfidence survive the market test?
266. Good news for value stocks: Further evidence on market efficiency
267. Taking a controlling interest
268. The impact of institutional trading on stock prices
269. Contrarian investment, extrapolation and risk
270. Leverage and house-price dynamics in U.S. cities
271. Can the market add and subtract? Mispricing in tech stock carve-outs
272. Selling hope, selling risk: Lessons for law from behavioral economics about stockbrokers and sophisticated customers
273. Half-truths: Protecting mistaken inferences by investors and others
274. Expectations and the cross-section of stock returns
275. Market efficiency and accounting research
276. Closed-end mutual funds
277. Investor sentiment and the closed-end fund puzzle
278. What is the intrinsic value of the Dow?
279. Do stock prices overreact to earnings news?
280. Price momentum and trading volume
281. Consumption, aggregate wealth and expected stock returns
282. The capitalization, amortization, and value-relevance of R&D
283. Fundamental information analysis
284. Momentum profits and the autocorrelation of returns
285. Market efficiency, rational expectations, and estimation risk
286. Puzzles in international financial markets
287. Trying to explain home bias in equities and consumption
288. Experimental research in financial accounting
289. Analysts' reactions to warnings of negative earnings
290. Can book-to-market, size and momentum be risk factors that predict economic growth?
291. Rationality and analysts' forecast bias
292. Underwriting relationships and analysts' earnings forecasts and investment recommendations
293. Analyst forecast error and the profitability of earnings revisions strategies: Evidence from U.S. and U.K. equity markets
294. Earnings revisions strategies in the U.S. and U.K., and Japan
295. Individual investors' risk judgments and investment decisions: The impact of accounting and market data
296. Mental accounting and riding loser stocks
297. Post-earnings announcement drift and analyst forecasts
298. When are contrarian profits due to stock market overreaction?
299. Throwing away a billion dollars: The cost of suboptimal exercise strategies in the swaptions market
300. The new issues puzzle
301. Uniformly least powerful tests of market efficiency
302. Do long-term shareholders benefit from corporate acquisitions?
303. Improved methods for tests of long-run abnormal stock returns
304. The association between revisions of financial analysts' earnings forecast and security price changes
305. An analysis of value destruction at AT&T's acquisition of NCR
306. Multifactor models do not explain deviations from the CAPM
307. The power of suggestion: Inertia in 401(k) participation and savings behavior
308. Individuals' perceptions and misperceptions of time series properties of quarterly earnings
309. Effects of comprehensive-income characteristics on nonprofessional investors' judgments: The role of financial-statement presentation format
310. Returns from investing in equity mutual funds 1971 to 1991
311. The term structure of interest rates revisited
312. Do long-term interest rates overreact to short-term interest rates
313. The impact of mandatory disclosure laws on product choices: An analysis of the salad dressing market
314. Management's incentives to avoid negative earnings surprises
315. Evidence of informational asymmetry from management earnings
316. Testing the present value relation for housing prices: Should I leave my house in San Francisco?
317. The equity premium: A puzzle
318. The predictability of real-estate returns and market timing
319. Conflict of interest and the credibility of under-writer analyst recommendations
320. Good news and bad news: Representation theorems and applications
321. Limited arbitrage in equity markets
322. Managerial decisions and long-term stock price performance
323. Do industries explain momentum?
324. Do firms pay to pool? Some empirical evidence
325. Do measures of investor sentiment predict returns?
326. Market efficiency and return statistics: Evidence from real estate and stock markets using a present-value approach
327. Herding and feedback trading by institutional and individual investors
328. Dynamic stock markets with multiple assets: An experimental
329. Are investors reluctant to realize their losses?
330. Volume, volatility, price and profit when all traders are above average
331. Do investors trade too much?
332. DotCom mania: A survey of market efficiency in the internet sector
333. Earnings, book values, and dividends in equity valuation
334. Financial statement analysis and the prediction of stock returns
335. Toward disclosure choice in securities offerings
336. Returns on initial public offerings of closed-end funds
337. The incidence of accounting changes and characteristics of firms making accounting changes
338. Value investing: The use of historical financial statement information to separate winners from losers
339. Rational expectations and the aggregation of diverse information in laboratory security markets
340. Costly arbitrage: Evidence from closed-end funds
341. Mean reversion in stock returns: Evidence and implications
342. Underreaction, overreaction, and increasing misreaction to information in the options market
343. Psychology and economics
344. A reconciliation of stock market anomalies
345. Analyst following of initial public offerings
346. Earnings management and the performance of seasoned equity offerings
347. Disposition effect and firm size: Nnew evidence on individual investor trading activity
348. Massively confused investors making conspicuously ignorant choices (MCI-MCIC)
349. Further insight into the standardized unexpected earnings anomaly: Size and serial correlation effects
350. Winner-loser reversals in national stock market indices: Can they be explained?
351. The walkdown to beatable analysts' forecasts: The roles of equity issuance and insider trading incentives
352. Enforcing arbitrage restrictions in experimental asset markets
353. The decline of inflation and the bull market of 1982 to 1999
354. Acquisition accounting method and bid premium for target firms
355. A critique of the asset pricing theory's tests
356. Orange juice and weather
357. R-squared
358. The seemingly anomalous price behavior of Royal Dutch Shell and Unilever nv/plc
359. International momentum strategies
360. Local return factors and turnover in emerging stock markets
361. Rational markets: Yes or no? the affirmative case
362. Effects of ambiguity in market experiments
363. Stock prices and Wall Street weather
364. Pricing an emerging industry: Evidence from internet subsidiary carve-outs
365. Academic accounting research and the standard setting process
366. Anomalies and market efficiency
367. Overreaction or fundamentals: Some lessons from insiders' response to the market crash of 1987
368. Investor and value line analyst underreaction to information about future earnings: The corrective role of non-earnings surprise information
369. The disposition to sell winners too early and ride losers too long: Theory and evidence
370. Human behavior and the efficiency of the financial system
371. Irrational exuberance
372. Measuring bubble expectations and investor confidence
373. Forward rates and future policy: Interpreting the term structure of interest rates
374. The limits to arbitrage
375. Size, overreaction, and book-to-market effects as default premia
376. Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-term Investment Strategies
377. A behavioral model of rational choice
378. Costly search and mutual fund flows
379. Why firms voluntarily disclose bad news
380. Earnings management: Reconciling the views of accounting academics, practitioners, and regulators
381. Do stock prices fully reflect information in accruals and cash flows about future earnings?
382. Post-earnings announcement drift and the dissemination of predictable information
383. A theory of predictable excess returns in real estate
384. The long-run performance of stock returns following debt offers
385. Efficient capital markets, inefficient firms: A model of myopic corporate behavior
386. The anatomy of the performance of buy and sell recommendations
387. Intertemporally dependent preferences and the volatility of consumption and wealth
388. Experimental asset markets: A survey
389. Time-varying expected small firm returns and closed-end fund discounts
390. Analysts' reactions to earnings pre-announcements strategies
391. Information disclosure and voluntary contributions to public goods
392. Non-disclosure and adverse disclosure as signals of firm value
393. Earnings management and the long-term market performance of initial public offerings
394. Earnings management and the underperformance of seasoned equity offerings
395. Why do new issues and high accrual firms underperform? The role of analysts' credulity
396. Perceived auditor quality and the earnings response coefficient
397. Are accruals during an initial public offering opportunistic?
398. Home bias and high turnover
399. Mental accounting and consumer choice
400. Inventory changes and future returns
401. Securities regulation in an electronic age: The impact of cognitive psychology
402. Belief in the law of small numbers
403. Availability: A heuristic for judging frequency and probability
404. Judgment under uncertainty: Heuristics and biases
405. Loss aversion and riskless choice: A reference dependent model
406. Discretionary disclosure
407. Endogenous proprietary costs through firm interdependence
408. Equity valuation implications of purchase versus pooling accounting
409. The disposition effect in securities trading: An experimental analysis
410. The equity premium puzzle and the risk-free rate puzzle
411. Herding among security analysts
412. Mutual fund herding and the impact on stock prices
413. Do brokerage analysts' recommendations have investment value?
414. Financial markets and the allocation of capital
415. Does arbitrage flatten demand curves for stocks?
416. The mispricing of abnormal accruals
417. Convergence trading with wealth effects: An amplification mechanism in financial markets