The Role of Feelings in Investor Decision-Making
This paper surveys the research on the influence of investor feelings on equity pricing and also develops a theoretical basis with which to understand the emerging findings of this area. The theoretical basis is developed with reference to research in the fields of <i>economic psychology</i> and <i>decision-making</i>. Recent advancements in understanding how feelings affect the general decision-making of individuals, especially under conditions of risk and uncertainty [e.g. Loewenstein <i>et al</i>. (2001). <i>Psychological Bulletin</i> 127: 267-286], are covered by the review. The theoretical basis is applied to analyze the existing research on investor feelings [e.g. Kamstra <i>et al</i>. (2000). <i>American Economic Review</i> (forthcoming); Hirshleifer and Shumway (2003). <i>Journal of Finance</i> 58 (3): 1009-1032]. This research can be broadly described as investigating whether variations in feelings that are widely experienced by people influence investor decision-making and, consequently, lead to predictable patterns in equity pricing. The paper concludes by suggesting a number of directions for future empirical and theoretical research. Copyright Blackwell Publishers Ltd, 2005.
Year of publication: |
2005
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Authors: | Lucey, Brian M. ; Dowling, Michael |
Published in: |
Journal of Economic Surveys. - Wiley Blackwell. - Vol. 19.2005, 2, p. 211-237
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Publisher: |
Wiley Blackwell |
Saved in:
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