How Value–Glamour Investors Use Financial Information: UK Evidence of Investor’s Confirmation Bias
42 Pages Posted: 8 Oct 2010
Date Written: August 2010
Abstract
The paper investigates investor’s behaviour in the context of value–glamour investing and fundamental analysis, and provides a direct test of the confirmation bias by bringing together the evidence from several strands of literature into a well-defined framework of investor behaviour. The empirical evidence presented is in line with a model of investor’s asymmetric reaction to good and bad news due to confirmation bias. Pessimistic value investors typically under-react to good financial information, but they process bad information rationally or over-confidently. On the contrary, glamour investors are often too optimistic to timely update prices following bad financial information, but they are likely to fairly price or even over-react when receiving good information.
Keywords: Value–glamour investing, financial statement analysis, contextual fundamental analysis, market efficiency, behavioural finance, confirmation bias
JEL Classification: G14
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Asset Pricing When Returns are Nonnormal: Fama-French Factors vs. Higher-Order Systematic Co-Moments
By Y. Peter Chung, Herb Johnson, ...
-
Asset Pricing When Returns are Nonnormal: Fama-French Factors vs. Higher-Order Systematic Co-Moments
By Y. Peter Chung, Herb Johnson, ...
-
Conditional Asset Pricing and Momentum
By Thanh Huynh and Daniel R. Smith
-
Time-Varying Conditional Skewness and the Market Risk Premium
-
CAPM, Higher Co-Moment and Factor Models of UK Stock Returns
By Chi-hsiou Daniel Hung, Mark B. Shackleton, ...
-
CAPM, Higher Co-Moment and Factor Models of UK Stock Returns
By Chi-hsiou Daniel Hung, Mark B. Shackleton, ...
-
How to Price Hedge Funds: From Two- to Four-Moment CAPM
By Angelo Ranaldo and Laurent Favre
-
Homogeneity Hypothesis in the Context of Asset Pricing Models: The Quadratic Market Model
By Giovanni Barone-adesi, Patrick Gagliardini, ...
-
A Three-Moment International Asset-Pricing Model: Theory and Evidence
By Vihang R. Errunza and Oumar Sy