The CEO Factor: Public Perception and Stock Price

Abstract

The stock market is a complex system where numerous sources of information affect investor trading decisions. These decisions impact the value of shares of a company’s stock. However, the stock market is largely unpredictable. No one knows precisely how much a particular piece of information will change the affected company’s trading price. Behavioral finance is a popular concept that seeks to identify how feelings and emotions can drive stock market changes. Considering how a CEO influences a company’s performance, the public’s perception of a CEO may also impact that company’s share value by extension. This paper explores the potential correlation between the CEO factor and stock price adjustments.

Keywords: Behavioral finance, CEO, personality, P/E ratio, stock price, investor reaction, halo effect

JEL Classification: G02