Investor psychology and security market under- and overreactions-英文文献.pdf

THE JOURNAL OF FINANCE • VOL. LIII, NO. 6 • DECEMBER 1998 Investor Psychology and Security Market Under- and Overreactions KENT DANIEL, DAVID HIRSHLEIFER, and AVANIDHAR SUBRAHMANYAM* ABSTRACT We propose a theory of securities market under- and overreactions based on two well-known psychological biases: investor overconfidence about the precision of private information; and biased self-attribution, which causes asymmetric shifts in investors’ confidence as a function of their investment outcomes. We show that overconfidence implies negative long-lag autocorrelations, excess volatility, and, when managerial actions are correlated with stock mispricing, public-event-based return predictability. Biased self-attribution adds positive short-lag autocorrela- tions “momentum”, short-run earnings “drift,” but negative correlation between future returns and long-term past stock market and accounting performance. The theory also offers several untested implications and implications for corporate fi- nancial policy. IN RECENT YEARS A BODY OF evidence on security returns has presented a sharp challenge to the traditional view that securities are rationally priced to re- flect all publicly available information. Some of the more pervasive anoma- lies can be classified as follows Appendix A cites the relevant literature: 1. Event-based return predictability public-event-date average stock re- turns of the same sign as average subsequent long-run abnormal per- formance 2. Short-term momentum positive short-term autocorrelation of stock re- turns, for individual stocks and the market as a whole *Daniel is at Northwestern University and NBER, Hirshleifer is at the University of Mich- ig