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| Author: | Daniel, K. Hirshleifer, D, Subrahmanyam, A. |
| Title: | Investor psychology and security market under- and overreactions |
| Journal: | Journal of Finance
1998 : DEC, VOL. 53:6, p. 1839-1885 |
| Index terms: | Stock markets Investment analysis Psychology |
| Freeterms: | Equity markets Securities markets |
| Language: | eng |
| Abstract: | The authors propose a theory of securities market under - und overreactions based on two well-known psychological biases: investor overconfidence about the precision of private information; and biased self-attribution, which causes asymmetric shifts in investors' confidence as a function of their investment outcomes. They show that overconfidence implies negative long-lag autocorrelations, excess volatility, and when managerial actions are correlated with stock mispricing, public-event-based return predictability. Biased self-attribution adds positive short-lag autocorrelations, short-run earnings "drift", but negative correlation between future returns and long-term past stock market and accounting performance. |
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