Podcast
Questions and Answers
What behavior is exhibited by investors due to the disposition effect when dealing with stocks?
What behavior is exhibited by investors due to the disposition effect when dealing with stocks?
Investors sell winning stocks more frequently than losing ones.
How does the disposition effect differ between stocks and mutual funds?
How does the disposition effect differ between stocks and mutual funds?
In mutual funds, investors sell losing funds more frequently than winning ones, contrary to the disposition effect seen in stocks.
What role does manager salience play in the reverse-disposition effect in mutual funds?
What role does manager salience play in the reverse-disposition effect in mutual funds?
Increased manager salience enhances the reverse-disposition effect, encouraging investors to sell losing funds.
Discuss the impact of delegation on the disposition effect as it relates to passively managed funds.
Discuss the impact of delegation on the disposition effect as it relates to passively managed funds.
What psychological mechanism drives both the disposition effect in stocks and the reverse-disposition effect in mutual funds?
What psychological mechanism drives both the disposition effect in stocks and the reverse-disposition effect in mutual funds?
What role does noise trader risk play in the persistence of mispricing in financial markets?
What role does noise trader risk play in the persistence of mispricing in financial markets?
Explain the concept of sluggish adjustment in the context of market mispricing.
Explain the concept of sluggish adjustment in the context of market mispricing.
How do negative stubs demonstrate violations of market efficiency?
How do negative stubs demonstrate violations of market efficiency?
What factors contribute to limits to arbitrage in correcting mispricing?
What factors contribute to limits to arbitrage in correcting mispricing?
Discuss the impact of macroeconomic experiences on individual risk preferences as suggested by Malmendier & Nagel's research.
Discuss the impact of macroeconomic experiences on individual risk preferences as suggested by Malmendier & Nagel's research.
What is the recency bias in the context of financial decision-making?
What is the recency bias in the context of financial decision-making?
How does market segmentation contribute to the persistence of mispricing?
How does market segmentation contribute to the persistence of mispricing?
What role did institutional investors play during the DotCom bubble from 1997 to 2000?
What role did institutional investors play during the DotCom bubble from 1997 to 2000?
How did individual investors behave after the burst of the DotCom bubble?
How did individual investors behave after the burst of the DotCom bubble?
What were the types of institutional investors most active during the technology stock purchasing phase?
What were the types of institutional investors most active during the technology stock purchasing phase?
What occurred around the peak of the DotCom bubble in March 2000 regarding institutional selling?
What occurred around the peak of the DotCom bubble in March 2000 regarding institutional selling?
What was one consequence of institutional buying behavior during the DotCom bubble?
What was one consequence of institutional buying behavior during the DotCom bubble?
What speculative behavior did institutions exhibit during the run-up phase of the DotCom bubble?
What speculative behavior did institutions exhibit during the run-up phase of the DotCom bubble?
In what way did institutional investors demonstrate greater sophistication after the DotCom bubble burst?
In what way did institutional investors demonstrate greater sophistication after the DotCom bubble burst?
According to the Abreu and Brunnermeier model, how did rational arbitrageurs behave during the bubble?
According to the Abreu and Brunnermeier model, how did rational arbitrageurs behave during the bubble?
What percentage of technology stock purchases did institutions account for during the run-up phase?
What percentage of technology stock purchases did institutions account for during the run-up phase?
What was the impact of institutional buying on the market's alignment with fundamentals?
What was the impact of institutional buying on the market's alignment with fundamentals?
How did institutional behavior contribute to market trends in the context of equity carve-outs?
How did institutional behavior contribute to market trends in the context of equity carve-outs?
What undermines the assumption that institutions counteract mispricing in the context of market bubbles?
What undermines the assumption that institutions counteract mispricing in the context of market bubbles?
What was the impact of individual investors' market timing during the crash?
What was the impact of individual investors' market timing during the crash?
What did the results reveal about market efficiency and the role of sophisticated investors?
What did the results reveal about market efficiency and the role of sophisticated investors?
According to Cheng, Raina & Xiong (2014), how did securitization agents behave during the housing bubble period?
According to Cheng, Raina & Xiong (2014), how did securitization agents behave during the housing bubble period?
How did the performance of the overall housing portfolio of securitization agents compare to that of control groups?
How did the performance of the overall housing portfolio of securitization agents compare to that of control groups?
What is one challenge presented by the behavior of institutional investors during the run-up to market bubbles?
What is one challenge presented by the behavior of institutional investors during the run-up to market bubbles?
What behavioral characteristic was common among securitization agents during the housing bubble?
What behavioral characteristic was common among securitization agents during the housing bubble?
Why is understanding speculative motives crucial in analyzing bubble dynamics?
Why is understanding speculative motives crucial in analyzing bubble dynamics?
What unusual behavior did institutional investors demonstrate prior to price corrections in equity carve-outs?
What unusual behavior did institutional investors demonstrate prior to price corrections in equity carve-outs?
How do beliefs and preferences in behavioral finance challenge traditional models of risk?
How do beliefs and preferences in behavioral finance challenge traditional models of risk?
What does the paper by Rhodes-Kropf et al. suggest about market misvaluation and merger activity?
What does the paper by Rhodes-Kropf et al. suggest about market misvaluation and merger activity?
What are the three components of the market-to-book ratio (M/B) identified in the study?
What are the three components of the market-to-book ratio (M/B) identified in the study?
According to the study, what role do overvalued firms play in acquisitions?
According to the study, what role do overvalued firms play in acquisitions?
What does the Rational Target Managers’ View suggest about their interpretation of acquirer valuations?
What does the Rational Target Managers’ View suggest about their interpretation of acquirer valuations?
In what manner does the method of payment in mergers relate to valuation waves?
In what manner does the method of payment in mergers relate to valuation waves?
What behavior is typically observed among stock acquirers compared to cash acquirers?
What behavior is typically observed among stock acquirers compared to cash acquirers?
What motivation might drive target managers to accept overvalued stock according to behavioral theory?
What motivation might drive target managers to accept overvalued stock according to behavioral theory?
What theories are tested in the study regarding merger waves?
What theories are tested in the study regarding merger waves?
Flashcards
Disposition Effect
Disposition Effect
Investors are more likely to sell stocks that have gained value (winners) compared to stocks that have lost value (losers).
Reverse Disposition Effect
Reverse Disposition Effect
Investors tend to sell mutual funds that have performed poorly more often than those that have performed well.
Delegation and the Reverse Disposition Effect
Delegation and the Reverse Disposition Effect
The reverse disposition effect is stronger when investors believe they have less control over a fund's performance, such as in passively managed funds.
Justification and Cognitive Dissonance
Justification and Cognitive Dissonance
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Manager Salience and the Reverse Disposition Effect
Manager Salience and the Reverse Disposition Effect
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Mispricing
Mispricing
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Noise Traders
Noise Traders
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Limits to Arbitrage
Limits to Arbitrage
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Greater Fool Theory
Greater Fool Theory
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Experience Hypothesis
Experience Hypothesis
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Experienced Returns & Risk Tolerance
Experienced Returns & Risk Tolerance
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Recency Bias in Investment
Recency Bias in Investment
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Market-to-Book Ratio (M/B)
Market-to-Book Ratio (M/B)
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Merger Waves
Merger Waves
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Neoclassical Q Theory
Neoclassical Q Theory
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Correlated Asymmetric Information (RKV)
Correlated Asymmetric Information (RKV)
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Behavioral Theory (Shleifer-Vishny)
Behavioral Theory (Shleifer-Vishny)
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Overvalued Firms as Acquirers
Overvalued Firms as Acquirers
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Role of Payment Method
Role of Payment Method
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Stock Transactions during Overvaluation
Stock Transactions during Overvaluation
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Implications for Behavioral Finance
Implications for Behavioral Finance
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Who drove the Dot-Com bubble?
Who drove the Dot-Com bubble?
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How did institutions fuel the Dot-Com bubble?
How did institutions fuel the Dot-Com bubble?
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What happened when the bubble reached its peak?
What happened when the bubble reached its peak?
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How did individuals react after the bubble burst?
How did individuals react after the bubble burst?
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What happened after the Dot-Com bubble burst?
What happened after the Dot-Com bubble burst?
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Did institutions contribute to mispricing?
Did institutions contribute to mispricing?
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How did institutions contribute to mispricing?
How did institutions contribute to mispricing?
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How did institutions contribute to the bubble's collapse?
How did institutions contribute to the bubble's collapse?
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What data did the study use to analyse institutional behavior?
What data did the study use to analyse institutional behavior?
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How does the study's findings align with existing models?
How does the study's findings align with existing models?
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Role of Institutions in the Housing Bubble
Role of Institutions in the Housing Bubble
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Role of Individuals in the Housing Bubble
Role of Individuals in the Housing Bubble
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Market Efficiency Hypothesis
Market Efficiency Hypothesis
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Study Objective
Study Objective
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Securitization Agent Behavior
Securitization Agent Behavior
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Mechanism for Securitization Agent Behavior
Mechanism for Securitization Agent Behavior
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Market Timing Hypothesis
Market Timing Hypothesis
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Cautiousness Hypothesis
Cautiousness Hypothesis
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Performance Hypothesis
Performance Hypothesis
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Conservative Consumption Hypothesis
Conservative Consumption Hypothesis
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Study Notes
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