Herd Behavior

In: Business and Management

Submitted By jialan
Words 33427
Pages 134
THE JOURNAL OF FINANCE • VOL. LVI, NO. 4 • AUGUST 2001

Investor Psychology and Asset Pricing
DAVID HIRSHLEIFER*
ABSTRACT
The basic paradigm of asset pricing is in vibrant f lux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for understanding decision biases, evaluates the a priori arguments and the capital market evidence bearing on the importance of investor psychology for security prices, and reviews recent models. The best plan is . . . to profit by the folly of others.
— Pliny the Elder, from John Bartlett, comp.
Familiar Quotations, 9th ed. 1901.
IN THE MUDDLED DAYS BEFORE THE RISE of modern finance, some otherwisereputable economists, such as Adam Smith, Irving Fisher, John Maynard
Keynes, and Harry Markowitz, thought that individual psychology affects prices.1 What if the creators of asset-pricing theory had followed this thread?
Picture a school of sociologists at the University of Chicago proposing the
Deficient Markets Hypothesis: that prices inaccurately ref lect all available information. A brilliant Stanford psychologist, call him Bill Blunte, invents the Deranged Anticipation and Perception Model ~or DAPM!, in which proxies for market misvaluation are used to predict security returns. Imagine the euphoria when researchers discovered that these mispricing proxies ~such
* Hirshleifer is from the Fisher College of Business, The Ohio State University. This survey was written for presentation at the American Finance Association Annual Meetings in New
Orleans, January, 2001. I especially thank the editor, George Constantinides, for valuable comments and suggestions. I also thank Franklin Allen, the discussant, Nicholas Barberis, Robert
Bloomfield,…...

Similar Documents

Financial Behavior

... Herding Behavior and Investment Performance Student: Nguyen Thi Lan Huong RA6997113 Advisor: Shao-Chi Chang Hao-Chieh Lin June, 2011 Acknowledgements It has been a valuable experience for me to work on this thesis. The completion of this research would not be able without the great help and support from my advisors, committee members and my family. So first of all, I would like to give my appreciation to Professor Shao-Chi Chang and Professor Hao-Chieh Lin, my respectable advisors, for their kind help and guidance throughout the entire period of writing this study. I would not be able to complete this research without their precious advice. Meanwhile, I would also appreciate Professor Yung-Ming Shiu’s encouragement and insightful comments on my proposal and final defense. I would like to also thank everyone at the Institute of International Management and Business Administration, National Cheng Kung University, who has contributed to the completion of this thesis. Finally, I would like to appreciate my family members, who have offered their constant support for my study here and thank them for be always by my side. Abstract Keywords: Personalities, Core self-evaluations, Extraversion, Herding behavior, Individual investors’ performance, Cognitive dissonance, Return, Satisfaction. This research examined the relationship among investor psychology, herding behavior and......

Words: 14013 - Pages: 57

Behavior

...Wallace ECE201: Intro to Early Childhood Behavior Management Instructor: Gayla Lloyd November 26, 2012 Behavior management is the most important topics in early childhood education. Parents and teachers become very frustrated when they are dealing with a child that has behavior issues. In this essay I’m going to explain to you the purpose of early childhood educations and the different strategies that can be used when dealing with early childhood behavior problems. When you have an are dealing with a group of kids that are all different they all have to be handled in a different way. Having classroom management is having a discipline system those teachers’ parents and others that in the school has put into place to help stop the challenging behavior problems. When you have a behavior management in place you will spend more time teaching your kids and less time dealing with disruption in the classroom. When you are dealing with challenging behavior you have to be consistent with whatever rule or method that you have put into place for that child or children. When a child know that you are not being consistent with the method that you are using than they will continue to try test you and see what going to happen next so being consistent is very important when dealing with a child and challenging behavior. Being proactive when dealing with certain......

Words: 1990 - Pages: 8

Animal Behavior and Human Behavior

...Animal Behavior and Human Behavior Mary A. Warren Rene Christopher Bio-365 Grand Canyon University Abstract Over time there has been much curiosity concerning animal behavior and the search to indentify the connection with our animal friends and the human-being. Fifty years ago, a young Englishwoman walking through a rainforest reserve came across a dark figure hunched over a termite nest. She stops to observe a big male chimpanzee actually making a tool to retrieve his food from the termite nest, just as we humans use a spoon or fork. This chimpanzee picks up a twig and strips the leaves from it and bends it to fit inside the little hole (Jane Goodall, 2010). Jane Goodall had witnessed one of the most important scientific observations ever in this chimpanzee. From a child she had always been told that humans and only humans used and made tools. She was amazed with what she had just witnessed with her own eyes, therefore doubting some information she had been told as a child. (Jane Goodall, 2010). This was the beginning of research on the human-chimpanzee relationship. There has also been a lot of research done concerning the elephant. Forty years of research has revealed the elephant also exhibit human like behavior. They communicate within their herds displaying many of the humanistic traits, expressing emotions such as flirting, anger and even some of the same parenting skills displayed in humans (Choi, 2011). The observation of the elephants from a distance,......

Words: 1709 - Pages: 7

Behavior

...INTERVIEW QUESTIONS – DIRECT CARE STAFF & SUPERVISOR SUPPLEMENT Behavior #1: Grounded (know who you are; confident, detachment; work/life balanced; have a sense of own identity) Targeted Questions: 1. What keeps you busy outside of (school, work, etc)? 2. Tell me about a sports team, activity, group that you belong to: a. Why do, or did, you enjoy this group? b. What needs do they meet for you? --------------------------------------------------------------------------------------------------------------------------------- Behavior #2: Tolerant of stress (can handle anxiety) Targeted Questions: 1. Tell me about a time when you had to overcome stress. How did you do this? 2. Tell me about the most stressful situation that you had to deal with. 3. Tell me about a time when stress overwhelmed you – and you failed because of it. How did you deal with it? 4. Have you ever had to help someone else overcome a very stressful situation? Tell me about it. How did you help? 5. Tell me about a time when you had to manage multiple responsibilities. How did you do it? 6. Tell me about a confrontation that you have had that made you feel uncomfortable. How did you deal with it? -------------------------------------------------------------------------------------------------------------------------------- Behavior #3: Team player Targeted Questions: 1. Have you been part of a “team” (sport, academic, social)? ...

Words: 1424 - Pages: 6

Behavior

...According to the Organizational Behavior third edition book the A- Team was consisted of five people, who didn’t know each other. They consist of Rebecca a 27 year old Marketing Manager, Aran a 52 year old Founder and CEO for a large Italian Fashion Company, Katie a 32year old Financial Analyst for a Wall street firm, Cameron a 23 year old Internet Entrepreneur who has his own small company, and last Pranarisha a 31 year old Manager for a non government organization that provides supports to poverty stricker area of Thailand. The A- team would have been ok if they haven’t had a member like Aran with the big head. Aran thought he could just place the other four because he had the most experience. I think Rebecca was right to let Aran know before it got started. The three was wrong for meeting without Aran and Pranarisha deciding whose going to do what part without them been present or giving the two a call while everyone was present. I think Aran age played a big part in this group because he was an older business man with adult kids and he probably look at the group as kids. I think Pranarisha shouldn’t have walked out without expressing her oppioion to the group before going to tell the professor. Professor Bowell was right for disbanded the group because everyone had the big head. It was so unfair for the group to over look Pranarisha. Discussion Question What happened to the A-Team? The A-Team didn’t last because everyone wanted to be a leader. Aran thought...

Words: 561 - Pages: 3

Behavior

... Violent behaviors among prisoners are for types of reasons from gangs to what race you are or even the choice of sexual partner you like. I am sure a lot of animosity is built up from being locked down with a bunch of people you don’t like or don’t like you. You also have to think about people fighting for turf and what people from all over the neighborhoods who don’t like each other. Prisoners have a lot of issues with each other from just not liking someone from the look they were given to who you associate with. This is the same for   violent behavior between inmates and staff is caused by anatomist built up on both sides. Staff is tired of dealing with attitudes and disrespect. That is also how inmates feel. I am sure they are tired of being told what they can or cannot do. it sometimes get so out of control the hate and anger that a inmate has for someone in staff they had to develop    Strategies for responding to violent behavior between inmates and staff. Some of the strategies are stopping them from having simple rights like visitors and commissary. Along with being on complete lock down or the hole as they call it. There is also a thing like adding time on to their sentence. This is   how violent behavior affects incarceration length. If they act out violently everything is on camera there is really not a lot of ways to get around what you do. If there is no camera it’s always going to be seen by someone. Who wouldn’t necessarily take less time if they...

Words: 302 - Pages: 2

Behavior

...Target Behavior Identify Target Behavior: The behavior I have chosen to modify is my sleeping behavior. As a college student sleep is something that I don’t get enough of. I chose to modify this behavior because sleep is an important part of life. I want to be tired when I go to bed and awake when I get up in the morning. I wanted to modify this behavior because I think having good sleeping patterns is a good trait to have in life. So much more can be done when we are awake and refreshed after a full nights sleep. Baseline Data: I observed my bedtimes for a week. They vary from night to night. One night I went to bed at midnight and the next night it was 10:45. For the entire week the times varied. The earliest I went to bed was 10:30 and the latest was 12:45. I do get up at the same time every morning because I have class at 8am every day. The fact that I go to bed at different times each night causes my body to respond differently to sleepiness during the day. Usually I would take a nap the day after going to bed late at night. Or I would sleep through my alarm and miss my 8 o’ clock class. Sleeping through class is definitely a bad result of not enough sleep. Taking naps once in a while is OK but I took a nap 4 out of 5 days this week while recording baseline data. I can get other things done during that time if I wasn’t so tired. Stimulus Conditions: The main stimulus condition that is present is my roommate. We usually stay up late at night......

Words: 807 - Pages: 4

Behavior

...1. We determine if the behavior is normal or abnormal by looking at these five items, 1. Is the behavior considered strange within the person’s own culture? So,it is okay to not to wear a bathing suite in Europe, but here in the USA it is not okay to walk around with nothing on in public. 2. Does the behavior cause personal distress? An example for this would be if a person experiences an emotional distress without any life experience that warrants it, they might be diagnosed. 3. Is the behavior maladaptive? For example if you wash your hands 100 times in one day that is maladaptive, because the person to afraid to do anything else. 4. Is the person a danger to self or others? For instance if you are feeling self destructive or having thoughts about hurting someone that’s something that needs to be addressed.5. Is the person legally responsible for his or her acts? The term insanity is a legal term that lawyers use when saying their client had abnormal thoughts and did not know right from wrong. 2. Three different psychological perspectives are1. Biological perspective: A psychological disorder is a symptom of an underlying physical disorder caused by structural or biochemical abnormality in the brain, by genetic inheritance, or by infection. The treatments include drugs, electroconvulsive therapy, or psychosurgery. 2. Biopsychosocial perspective, psychological disorders result from a combination of biological, psychological, and social causes. The treatment is employ......

Words: 693 - Pages: 3

Behavior

...Behavior Change Summary My behavior change project was to get more sleep at night. The goal of my behavior change plan was to get at least seven or eight hours of sleep and to determine the amount of sleep that was best for my body. I wanted to feel energized when I woke up in the morning, and to continue that feeling throughout the day. My plan was to have set times that I would need to be in bed by. I began with the amount of sleep I was currently getting each night, which was only about four or five hours. I then increased the amount of sleep I was getting by a half hour, and continued to get that amount of sleep for a week, until I increased the amount by another half hour. I repeated this process each week until I received eight hours of sleep per night. I was not to take any naps during the day if I did not receive the planned amount of sleep that night. The reason for this type of plan was because I knew I would not be able to just increase the amount of sleep to eight hours right off the bat. I needed to gradually get my body used to that kind of sleep each night. I feel that in a sense I did accomplish my goal. Although I am not at exactly eight hours of sleep per night, I have found the number of hours of sleep each night that my body needs to feel rejuvenated. I have found that eight hours of sleep each night is too much for my body. I wake up feeling way too tired. However, when I was at weeks three, four, and five, I woke up feeling awake and energized and it......

Words: 854 - Pages: 4

Behaviors

...Behaviors Select Window | Behaviors to open the Behaviors panel Select the Submit button on the form and then click the Add Behavior button in the Behaviors panel. A list of options that can be modified will appear. Select Validate Form (see figure below). The validate form dialog box should appear. In the fields box, select the information in the form that is required and select the Required check box. Click OK to close the Validate Form box and to implement the behaviors. Save the changes. Dragging AP Elements Display a template file Click on the blank page to deselect the AP elements. In the tag selector, click the <body> tag. Click Add Behaviors in the behaviors panel and select Drag AP Element. The Drag Ap Element dialog box will appear (see figure below). Select the Basic tag and from the drop down list Select the desired div. Click OK Select File | Save All to save the changes. Using Assets and the Dreamweaver Library Window | Assets. From the Main menu select The Assets panel should appear in the files panel. Select the Images group from the Assets panel. Click the desired photo to select it. Click and drag this file into the desired editable region and add alternate text. Select the Library group in the Assets panel. Then select the paragraph in the editable region and drag it into the bottom section of the Assets panel. An icon and Text box should appear. Name the icon and press Enter to update Library. Save changes...

Words: 255 - Pages: 2

Behavior

...Organizational Behavior Terminology and Concept Paper I begin my employment with the Navajo Nation Early Childhood Program in April 2000. My job title was Accounting Clerk and to work with the Accountant. The organizational culture was a strong culture, whereas the organization had a clear vision of the future to serve and build the foundation of each child. The staffs were trained to stand with strong beliefs to show the children the beginning of early education and to teach to talk and using the motor skills. The values of the individual child were critical and the children learned from each others. The children were taught to come out of the shyness and learn to inaugurate themselves. Among the three organizational cultures, which is; Passive and Defensive cultures, Constructive cultures, and Aggressive and Defensive cultures, the most culture that was practice was constructive culture. There were times, it may lead to passive and aggressive but each staff was monitored on daily base by the coordinators and liaisons. This education program had a serious organizational behavior. The employees were trained to take their job seriously because there were children involved in the age ranging from three to five-year-old. This organization was one of the agencies that consist of four agencies in all and there were 250 employees, if I can recall. The employee’s main focus is on the child and making sure there the child-to-teacher ratio is met. In this local town, the OEH......

Words: 720 - Pages: 3

Group Behavior

...Group Behavior Robert Watson Columbia College In an organizational context, group behavior is an important concept as it determines the cohesiveness and coherence of the organizational culture and organizational communication. For instance, unless the human resource department (HRD) function communicates the policies clearly and cogently, the employees would not participate and comply with them wholeheartedly. Hence, molding group behavior is important for organizations. However, this cannot be construed to mean that all employees must think and act alike. On the contrary, innovation cannot happen when group behavior is the same across all levels. The point here is that while organizations must strive for cohesiveness and coherence, they must not sacrifice the principles of individual creativity and brilliance that are at the heart of organizational change and innovation. In these turbulent times, there is a need for individuals to take a stand and be firm on the direction that the organization seeks to take. Of course, group behavior needs to be inculcated in organizations for the simple reason that employees must conform to the rules and regulations that govern organizations. Hence, there is a need for uniformity and consistency in the way organizational group behavior has to be molded. Group behavior must be encouraged by the HRD function as a means to ensure cohesiveness in the organization. In the technology sector, we often find employees straight out of......

Words: 1600 - Pages: 7

Behavior

...Organizational Behaviors MGT/312 April 13, 2015 Jo Hogg Organizational behaviors will always play an important role in determining an effective functioning of any organization. We have to have a complete understanding of how the organizational behavior works and to help in the better management of employees/people in any organization. Some of the strategies and policies that many organizations adopt will also depend on the organizational behavior. (Kelly, Joe. Organizational behavior) One of the main components of an organizational behavior is the people. Of course, when managed in the right way the organization will perform extremely well in the market. Each one person has a goal to fulfill and they want to achieve that. There should always be proper communication amongst everyone in the company. Managers should enhance communication of their employees. The management team should focus on making sure that there is an existing trust between all employees. Teamwork plays a big part as well and will help to improve employee efficiency. The organization should always keep track of all competitors in the market, labor forces and also reaction of the people to the changes that are always happening in the global market. Organizations come in two divisions: Informal organization and formal organization. When we look at informal this does not have a structure that they follow however, formal does have that structure that they follow. With having......

Words: 520 - Pages: 3

Behavior

...Introduction: A successful change in behavior requires a careful planning and eagerness to challenge the unexpected obstacles. I would like to practice a healthy lifestyle by exercising regularly for an hour 5 days a week. A baseline for current behavior is a mean of 0.37 hours per weak. I hypothesize 0.71 hours more exercise each week would help me feel better and may help me loose some weight. Behavior Assessment My target behavior is to exercise 5 days a week (Monday through Friday) for an hour. To achieve this goal, I established a baseline for my exercise behavior. I recorded the dates and times I exercised per day for the last seven days. I started recording data from June 11th, 2011 at 00:00 and stopped recording on June 17th, 2011 at 23:59. This seven day period was before the intervention week. Based on this information, I set a goal for the intervention week one. Intervention week one started Sunday June 18, 2011 based on a 24 hour period from 00:00 to 23:59. My goal for the intervention week one is to exercise more. I recorded the entry time at the first possible moment before I started exercise, and I recorded the exit time as soon as I stopped. I chose to graph the data using a bar graph. Time is on the horizontal axis labeled by the day of the week. The quantity of exercise (in hours per day) was labeled on the vertical axis. Figure 1 shows the recorded values from Saturday June 11, 2011 to Friday June 24, 2011. For the week before intervention, the......

Words: 353 - Pages: 2

Behavior

...The purpose of the study was to determine possible differences in leadership behaviors, using the Revised Leadership for Sport Scale (RLSS), between male and female coaches and among different coaching levels. The researchers submitted two hypotheses. The first hypothesis was that male and female coaches would respond differently to the RLSS in overall leadership behaviors. The second hypothesis was that differences on the RLSS would occur among coaching levels: junior high, high school, and college. The sample was nonrandom, including 162 coaches that were chosen on a volunteer basis. Within the sample, 118 (0.73) of the coaches were male, while 44 (0.27) were female. With regard to coaching level, 25 (0.15) were junior high coaches, 99 (0.61) high school, and 38 (0.24) at the college level. While this is a good sample size, the problem lies with the distribution of the sample. The sample number for junior high coaches, in particular, is rather low. A larger sample with regard to all categories would have aided in the data analysis, particularly when looking for possible interactions between gender and coaching level. The instrument utilized was the Revised Leadership for Sport Scale (RLSS) developed by Zhang, Jensen, and Mann in 1996. This scale is used to measure six leadership behaviors: training and instruction, democratic, autocratic, social support, positive feedback, ......

Words: 701 - Pages: 3