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Full-Text Articles in Finance and Financial Management
A Dual-Role Analysis Of Game Form Misconception And Cognitive Bias In Financial And Economic Decision Making, Chinedum D. Nwadiora
A Dual-Role Analysis Of Game Form Misconception And Cognitive Bias In Financial And Economic Decision Making, Chinedum D. Nwadiora
University of New Orleans Theses and Dissertations
The endowment and the framing effect are widely examined cognitive biases. The experimental economics literature, using choice data gathered through an elicitation device, commonly finds evidence of these biases. Recent work by Cason & Plott (2014) shows that the interpretation of choice data as consistent with biases related non-standard preference theory could also be consistent with confusion or misconception of the game type used to elucidate preferences. I use the Cason and Plott card auction framework to analyze offers of buyers and sellers in an experimental setting with subjects from the University of New Orleans simulating 97 sellers and 90 …
Behavioral Finance And Its Impact On Investing, Jordan Fieger
Behavioral Finance And Its Impact On Investing, Jordan Fieger
Senior Honors Theses
The field of behavioral finance has seen incredible growth over the past half century as it has explored the effect that cognitive psychological biases can have on investors’ financial decisions. Behavioral finance stands in stark contrast to the efficient market hypothesis, as it attributes market inefficiencies to investors who are not perfectly rational human beings. It offers a solution to the observed 3.5% gap that active equity investors miss out on in the market compared to passive index funds, which it attributes to their emotions and psychological biases. These common human biases can be grouped into five major categories: heuristics, …
Stock Loan Lotteries And Individual Investment Performance, Jordan Moore
Stock Loan Lotteries And Individual Investment Performance, Jordan Moore
Rohrer College of Business Faculty Scholarship
Individual investors trade excessively, sell winners too soon, and overweight stocks with lottery features and low expected returns. This paper models a financial innovation to address these biases and improve individual investor performance. Individual investors pledge shares of stock to an exchange for multiple periods and face a steep penalty for redeeming shares early. The exchange lends the shares to institutions and holds a lottery with the lending fees. I extend the Barberis and Xiong (2009) discrete-time model of realization utility to include stock loan lotteries. Investors with cumulative prospect theory preferences are reluctant to forgo trading opportunities for fixed …