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http://dspace.mediu.edu.my:8181/xmlui/handle/1721.1/1765| Title: | Testing Behavioral Finance Theories Using Trends and Sequences in Financial Performance |
| Keywords: | Behavioral Finance Behavioral-finance |
| Issue Date: | 1-Jun-2013 |
| Description: | Models based on psychological biases can explain momentum and reversal in stock returns, but risk overfitting of theory to data. We examine a central psychological bias, representativeness, which underlies many behavioral-finance theories. According to this bias, individuals form predictions about future outcomes based on how closely past outcomes fit certain categories. To produce out-of sample tests, we use accounting performance to identify these categories and test the idea that investors misclassify firms and thus make biased forecasts. We find evidence of short-term accounting momentum, consistent with the idea that investors fail to immediately incorporate new information, but find no support for long-term reversal related to accounting performance. Contrary to theory, we find little evidence that the consistency of past accounting performance is related to future returns |
| URI: | http://koha.mediu.edu.my:8181/jspui/handle/1721 |
| Other Identifiers: | http://hdl.handle.net/1721.1/1765 |
| Appears in Collections: | MIT Items |
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