Stock price reactions to company-specific events are supposed to reflect the effect of the events on the companies’ expected future financial performance. Yet, it is difficult to estimate the effect an event may exert on a given company and, along with rational considerations, investors’ reactions to company-specific events may also be affected by various psychological factors. In this chapter, we sketch the picture emerging from three studies of ours dealing with psychological aspects of investors’ reactions to analyst recommendation revisions. These studies demonstrate that stock price reactions to recommendation revisions may depend on a number of factors, such as: (i) contemporaneous stock market index returns; (ii) contemporaneous changes in the value of VIX index; and (iii) daylight duration.We attribute the findings to the effects of the availability heuristic and mood on investors’ behavior.
|Title of host publication
|Subtitle of host publication
|Where do Investors Biases Come From?
|World Scientific Publishing Co.
|Number of pages
|Published - 1 Jan 2016
Bibliographical notePublisher Copyright:
© 2017 by World Scientific Publishing Co. Pte. Ltd.
- Analyst recommendation revisions
- Availability heuristic
- Behavioral finance
- Financial market sentiment
- Mood maintenance hypothesis
- Seasonal affective disorder
ASJC Scopus subject areas
- Economics, Econometrics and Finance (all)
- General Business, Management and Accounting