Volume 9 Issue 3 (November-January 1993)

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Betting on trends: Intuitive forecasts of financial risk and return

De Bondt, W.P.M.
Pages 355-371
Abstract

Based on nearly 38 000 forecasts of stock prices and exchange rates, it appears that non-experts expect the continuation of apparent past 'trends' in prices. Thus, they are optimistic in bull markets and pessimistic in bear markets. Interestingly, the subjects hedge their forecasts, i.e. their subjective probability distributions are skewed in the opposite direction. As a result, perceived risk also depends on prior performance.

Keywords: Investor psychology , Noise traders , Overreaction , Confidence intervals
FULL TEXT LINK
http://dx.doi.org/10.1016/0169-2070(93)90030-Q
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