Corporation Strategic Investment on Behavioral Finance

The traditional DCF approach ignoring the managerial flexibility of the decision makers often underestimates the value of project value. This paper not only takes into account the uncertainty of investment and the irreversibility of the sunk cost, but also takes the competitors＇ erode to the project value into it. Relax the EMH and the rationality of the investor＇s hypothesis, integrate the behavioral finance theory and the game option, and construct the valuing frame based on the behavioral finance and game option theory to make a scientific and effective project decision-making approach.

The expansion and limitation of behavioral finance research methods

Behavioral finance inherits the standard research methods in the finance, and it makes outstanding contribution to leading the experimental research into the field of finance. It uses the cognitive science as the method guide to expand its scientific research tools. On one hand, the intelligent development of the cognitive science provides an important and effective means of a tool for the behavioral finance research; on the other hand, precisely because behavioral finance theories of progress makes a certain extent, dependent on the modem cognitive science research results and thus the development of cognitive science, its results application and limitation will be confined to a direct impact on the development of behavioral finance. That is why we need an in-depth study of the new method of behavioral finance research and grasps their limitations.

Behavioral Finance Theory and Its Application in Investment Decision

Behavioral finance theory is constantly relaxing or even abandons traditional financial theory rational man assumptions and the efficient market hypothesis, based on the decision-making process to the actual person＇s psychological characteristics as variables studied financial market vision, such as asset pricing and portfolio a series of questions theoretical system. In this paper, from home and abroad on behavioral finance theory, based on the current situation in our country from the company＇s investment policy analysis behavioral finance theory in corporate finance in the application, in order for some of our corporate decision makers to provide a non-decision against the company fully rational and non-efficient market investment strategy.

Financial decision‑making behaviors of Ethnic Tibetan Households based on mental accounting

Ethnic Tibetans(ETs)typically reside in the remote plateaus of China and possess strong cultural and spiritual values.Their financial decision-making is influenced by economic and physical factors,unique culture,social norms,and psychological motivators.We conducted an in-person survey of 480 randomly selected ET households across four provinces in rural China.The survey data was analyzed using three different econometric models—probit,ordered probit,and ranked ordered logit—to examine the choice of borrowing from formal or informal credit sources,the number of sources borrowed from,and repayment priority.Our findings indicate that mental accounting plays a significant role in the financial decision-making process of ET households.Additionally,we find that the informal credit source is strongly associated with the financial decisions of ET households.The majority of loans from formal financial institutions are used to meet daily needs,as opposed to purchasing productive inputs.Our results also suggest that strong social relationships and religious beliefs prevent households from defaulting,and that loans from formal financial sources receive repayment priority.China would benefit from promoting inclusive finance and encouraging the adoption of improved agricultural practices to support the prosperity of ET and other minority communities.

A credit scoring model based on the Myers–Briggs type indicator in online peer-to-peer lending

Although psychometric features have been considered for alternative credit scoring,they have not yet been applied to peer-to-peer(P2P)lending because such information is not available on platforms.This study proposed an alternative credit scoring model for P2P lending by extracting typical personality types inferred from the borrowers’job category.We projected a virtual space of borrowers by using the affinity matrix based on the Myers–Briggs type indicator(MBTI)that fits each job category.Applying the distance in this space to Lending Club data,we used locally weighted logistic regression to vary the coefficients of the variables,which affect loan repayments,with each MBTI type for predicting the default probability.We found that each MBTI type’s credit scoring model has different significant variables.This study provides insights into breakthroughs in developing alternative credit scoring for P2P lending.

Light a lamp and look at the stock market

In this study,we investigate the impact of the light-a-lamp event that occurred in India during the COVID-19 lockdown.This event happened across the country,and millions of people participated in it.We link this event to the stock market through investor sentiment and misattribution bias.We find a 9%hike in the market return on the postevent day.The effect is heterogeneous in terms of beta,downside risk,volatility,and financial distress.We also find an increase(decrease)in long-term bond yields(price),which together suggests that market participants demanded risky assets in the postevent day.

Day-of-the-week returns and mood:an exterior template approach

Rule-and template-based pattern-recognition methods are alternative ways to identify various patterns in stock prices alongside more traditional econometric tools.In this study,we generate an exterior template of mood scores from two perplexingly similar samples of mood scores 50 years apart.The mood scores template enables us to deploy a direct test of the behavioral explanation for the day-of-the-week effect.Our evidence shows that the day-of-the-week mood template is a potentially valid explanation of the day-of-the-week effect.Subperiod analysis suggests that the magnitude of the day-ofthe-week effect has declined over time.That decline,however,is not uniform across size deciles and is more pronounced in larger capitalization deciles.There is no decline though in the ability of mood to explain the day-of-the-week effect.

The evolution and cross-section of the dayof-the-week effect

We study the day-of-the-week effect across size deciles and in three 18-year subperiods.The results show a decline in the magnitude of the day-of-the-week effect,but the effect did not vanish.We find that the decline in the magnitude of the effect is larger in the larger market capitalization deciles.We also find substantial evidence that the day-of-the-week effect is characterized by a pattern of monotonically improving returns during the week,but the pattern is interrupted as market capitalization increases.The behavioral explanation for the day-of-the-week effect,based on monotonically improving mood throughout the week,is therefore a stronger candidate in smaller-market capitalization deciles.

Agents’ Behavior in Market Bubbles： Herding and Information Effects

This paper explores some behavioral factors that may explain the formation of speculative bubbles in financial markets. The study adopts an experimental approach focused on the agents’ behavior when facing a “true” bubble and is incentivized to herd and/or receive information about the market sentiment. For this purpose, a straightforward laboratory experiment that reproduces the dotcom market bubble and asks subjects to forecast asset prices in a true dynamic information scenario. The experiment was conducted in the laboratory of the Faculty of Economics at the University of Salamanca and involved 137 undergraduate students in the degree of economics. The results show that incentives to the herding behavior increase the forecasted volatility and thus contribute to the bubble inflation. Nevertheless, this effect may be offset by giving information to the agents about the expected market trend. Therefore, under herding effects, it is the absence of clear signals about market sentiments what inflates the bubble.

Factors Influencing Retail Investors＇ Attitude Towards Investing in Equity Stocks： A Study in Tamil Nadu

Research in behavioral finance is comparatively less in India, when compared to other foreign countries. Globalization of financial markets has been increasing the retail investors＇ community over the past two decades by providing a wide variety of market and investment options. However, it makes much more complex in their investment decisions process. This paper aims at identifying the factors influencing the retail investor＇s attitude. This paper develops a modified questionnaire. The average value of the five top highly influential factors according to the sample retail investors＇ were Investors＇ tolerance for risk, strength of the Indian economy, media focus on the stock market, political stability and finally government policy towards business. Four factors were given lowest priority or which had low influence on the attitude of the retail investors investing in equity stocks. Stories of successful investors was considered to be the lowest influencing factors among the four, get rich quick philosophy, information available on internet, cost cutting by companies.

Dividend Changes and Future Earnings Performance： Evidence from UK Market

This paper investigates the dividend signaling hypothesis, described here as the relationship between dividend changes and future earnings performance. We find that managers pursue different patterns in UK from that in US when making dividend policy. A positive and significant association between dividend changes and the growth of future earnings is observed in the immediately following year after dividend announced There isn＇t significant link in the longer future. These phenomena are caused by managers＇ near-eyesight in UK market. In addition, an interesting finding is that dividend decreases have larger negative influence on earnings growth than positive impact on earnings prospects of dividend increases. This is consistent with the infrequent occurrence of dividend reduction.

Short Sellers Are Indeed Sophisticated Traders!

Current literature shows that short sellers earn positive returns on their trades and that the superior performance of short sellers is due to their better analytic skills. In this paper, we investigate, if it is possible for a short seller to make profits even if he does not have insider information or is not sophisticated. We use a one period model and assume that stock price follows a random walk with a positive drift to show that the＇ expected return for an uninformed short seller is always negative and his risks are always greater than the risks of a stock buyer. Hence a short seller would not trade unless he has superior trading skills and/or information. We also show that the market conditions when the stock＇s dividend yield is greater than the risk free rate gives the shortsellers advantage over stock buyers.

An Empirical Test of Optimism Bias in Capital Budgeting Decisions

Behavioral finance is a field that is scrutinizing the adequacy of traditional financial theories using insights from the disciplines of psychology and sociology. Many studies within its realm test the stock market behaviors, and behavioral phenomena are still to be tested in the area of corporate finance. This study aims to contribute to the behavioral corporate finance literature by a research in one of the psychological phenomena affecting the decision makers＇ abilities to reach conclusions rationally. In this study, it is aimed to investigate one of the biases, namely, the optimism bias in corporate capital budgeting decisions. Optimism in decision making can be associated with estimating lower costs and higher revenues. Thus, by assessing the forecasts of decision makers, the existence of optimism in their decisions is tried to be seen. This study aims at contributing to the literature in that it is conducted in an emerging country like Turkey.

Bitcoin Price Manipulation Regulation from a Game Perspective

Frequent price manipulation in the Bitcoin market will lead to market risk and seriously disrupt the financial order,but there is less research on its regulation.We address the Bitcoin price manipulation problem by building a regulatory game model.First,we study the price manipulation mechanism of the Bitcoin market based on behavioral finance and clarify the boundary conditions.Second,we introduce regulator constraints and establish a game model between the manipulator and the regulator.Further,through variable deconstruction,parameter verification,and simulation analysis,we explore how to achieve effective regulation of Bitcoin price manipulation.We find that the effective regulation of Bitcoin price manipulation can be achieved in three ways:(1)Adjust the penalty coefficient with a certain lower threshold so that the manipulator’s expected return is negative;(2)Set the lowest possible price fluctuation standard while ensuring that it does not interfere with market-based transactions;(3)The simulation of price manipulation regulation is optimized and most efficiently controlled when the probability of investigation is dynamically adjusted by a concave function on the price fluctuation standard.

DEPENDENCE BETWEEN STOCK RETURNS AND INVESTOR SENTIMENT IN CHINESE MARKETS:A COPULA APPROACH

Using data of newly opened stock trading accounts in China as a proxy of investor sentiment index, the authors employ the time-varying copula-GARCH model with Hansen＇s skewed Student-t innovations to investigate the dynamic dependence between investor sentiment and stock returns. The empirical findings show that shifts in investor sentiment are asymptotically positively correlated to stock returns in extreme value situations in both A shares market and B shares market in China, that is to say, stock prices will increase （decrease） more when investors become more bullish （bearish）. Also, results show that the dependence between investor sentiment and stock returns is time-varying, which means that the traditional Pearson＇s correlation based on normal distribution is not enough to describe the relationship between stock market behavior and investor behavior.

Study on the Investment Behavior under Transaction Costin Futures Market

The developing stock markets of China are waiting to see derivative securities such as stock\|index futures. In this paper, based on the theory of behavioral finance,investment behavior under transaction cost in futures market was studied.

The influence of Disposition Effect on Stock Return in China

This paper introduces the disposition effect into asset pricing process, and sets dynamic equilibrium model on which we can discuss the pattern of risk assets＇ returns. On base of theory results, we use data of China stock market to analyze the influence of disposition effect on stock return. The empirical study result confirms the disposition effect＇s existence in China stock market and it does affect the stock return.