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Prospect Theory and Herding Behavior in the Stock Market
Journal of Financial Studies
View Archive Info| Field | Value | |
| Title |
Prospect Theory and Herding Behavior in the Stock Market
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| Creator |
Yu-Hsiu Lin
Len-Kuo Hu |
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| Description |
We study investorsf consumption-portfolio choices and their incentive to become informed in an intertemporal model where investors derive prospect-type utility from the change in their investment income in addition to the conventional consumption satisfaction. Our study shows that the inclusion of the utility from financial wealth changes lessens the benign effect of improved information precision from the acquisition of private signal by the informed traders. Therefore the benefit of being informed becomes smaller and declines to zero more rapidly in our framework than in the standard consumption-based model. As a result investors are more likely to herd in the stock market when they are driven by the prospect-type utility. Key words: prospect theory, adaptive expectations, herding propensity |
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| Publisher |
Journal of Financial Studies
財務金èžå¸åˆŠ |
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| Date |
2011-05-27
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| Type |
—
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| Format |
application/pdf
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| Identifier |
http://www.jfs.org.tw/index.php/jfs/article/view/2011123
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| Source |
Journal of Financial Studies; Vol 16, No 4 (2008); 109
財務金èžå¸åˆŠ; Vol 16, No 4 (2008); 109 |
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| Language |
—
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