The Boasting Effect : How Interpersonal Utility Affects Stock Prices

Can stock price movements be traced back partially to interpersonal utility effects? That is, are shareholders also chasing nonfinancial goals apart from generating profit under risk that can be ascribed neither to findings of behavioral finance nor to traditional economical theories? Inspired by rational choice theory, this paper tries to explore this largely uncharted issue pinpointing the example of boasting. It is stated, that shareholders of popular glamour/growth stocks can gain excess nonfinancial utility/value by boasting about being a shareholder of these stocks and making profit with them, compared to shareholders of “boring” value stocks. This difference in nonfinancial utility is capable to partially explain the empirically detected valuation and return differential of glamour and value stocks