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Author Frieder, Laura L
Title An investigation of the trading patterns and heuristics of stockholders
book jacket
Descript 155 p
Note Source: Dissertation Abstracts International, Volume: 65-05, Section: A, page: 1858
Chairs: Avanidhar Subrahmanyam; Richard Roll
Thesis (Ph.D.)--University of California, Los Angeles, 2004
In the first of three essays, I analyze order imbalances (buy orders less sell orders) following earnings surprises to determine whether traders invest in a manner that is consistent with the representativeness and availability heuristics (manifested respectively by undue extrapolation of perceived patterns in random sequences and overreaction to dramatic or vivid events). I then test whether such trading patterns affect returns. I uncover evidence of extrapolation in that, following strings of consecutive positive earnings surprises, net buying (after controlling for other regularities in trading activity) is significantly greater than it is after isolated positive surprises. This difference is increasing in string-length. Furthermore, subsequent to strings, purchasing activity is negatively correlated with returns throughout the remainder of the year
In the second essay, we investigate the effect of brand perceptions on investor incentives to hold stocks. We find a significantly negative cross-sectional relation between institutional holdings and brand visibility, suggesting a propensity for individual investors to hold stocks with familiar products. We find that institutional holdings are positively related to firm size and beta, though negatively related to return volatility, which supports the notion that institutional portfolios eschew small firms with high volatility, whereas individual investors prefer stocks with low systematic risk and high recognition. The analysis contributes to our understanding of how individuals form their portfolios
In the third essay, we study how returns and volume behave around open-market holidays: specifically, the observance of Saint Patrick's Day, Rosh Hashanah and Yom Kippur. We find that on Rosh Hashanah and Yom Kippur, volume is down relative to that on all trading days in the sample. This indicates that the opportunity cost of trading is high for a considerable proportion of traders on these days. Returns are significantly higher on days preceding Saint Patrick's Day and Rosh Hashanah, consistent with the notion that market returns reflect the festive nature of these occasions. We uncover evidence of significantly negative returns after Yom Kippur, which accords with the market reflecting the solemn nature of this occasion. Our results indicate that mood-based explanations form a viable avenue for explaining market movements
School code: 0031
Host Item Dissertation Abstracts International 65-05A
Subject Business Administration, Management
Economics, Finance
Alt Author University of California, Los Angeles
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