Please note that corrections may take a couple of weeks to filter through the various RePEc services. Economic literature: papers , articles , software , chapters , books. FRED data. My bibliography Save this paper. Social Transmission Bias and Investor Behavior. Registered: Bing Han David Hirshleifer. We offer a new social approach to investment decision making and asset prices. Investors discuss their strategies and convert others to their strategies with a probability that increases in investment returns.
The conversion rate is shown to be convex in realized returns. Unconditionally, active strategies e. The model has strong predictions for how adoption of active strategies depends on investors' social networks. In contrast with nonsocial approaches, sociability, self-enhancing transmission and other features of the communication process determine the popularity and pricing of active investment strategies. Corrections All material on this site has been provided by the respective publishers and authors.
Louis Fed. Help us Corrections Found an error or omission? In a new preface, Shiller reflects on some of the challenges facing narrative economics, discusses the connection between disease epidemics and economic epidemics, and suggests why epidemiology may hold lessons for fighting economic contagions. I find that inside information flows through strong social ties based on family, friends, and geographic proximity.
On average, inside tips originate from corporate executives and reach buy-side investors after three links in the network. More broadly, this paper provides some of the only direct evidence of person-to-person communication among investors. This finding is robust to using organ donation as an alternative social capital measure and incremental to the effects of religiosity, corporate social responsibility, and tax avoidance.
We identify the causal relation using companies with a social-capital-changing headquarters relocation. We also find that high-social-capital firms face loosened nonprice loan terms, incur lower at-issue bond spreads, and prefer public bonds over bank loans. We conclude that debt holders perceive social capital as providing environmental pressure that constrains opportunistic firm behaviors in debt contracting.
A period has more suspense if the variance of the next period's beliefs is greater. A period has more surprise if the current belief is further from the last period's belief. Under these definitions, we analyze the optimal way to reveal information over time so as to maximize expected suspense or surprise experienced by a Bayesian audience.
We apply our results to the design of mystery novels, political primaries, casinos, game shows, auctions, and sports. The overlap of funds whose managers reside in the same neighborhood is considerably higher than that of funds whose managers live in the same city but in different neighborhoods. These effects are larger when managers share a similar ethnic background, and are not explained by preferences.
Valuable information is transmitted through these peer networks: a long-short strategy composed of stocks purchased minus sold by neighboring managers delivers positive risk-adjusted returns. Unlike prior empirical work, our tests disentangle the effects of social interactions from community effects. We find that individualism is positively associated with trading volume and volatility, as well as to the magnitude of momentum profits.
Momentum profits are also positively related to analyst forecast dispersion, transaction costs, and the familiarity of the market to foreigners, and negatively related to firm size and volatility. However, the addition of these and other variables does not dampen the relation between individualism and momentum profits.
We focus on connections between mutual fund managers and corporate board members via shared education networks. We find that portfolio managers place larger bets on connected firms and perform significantly better on these holdings relative to their nonconnected holdings. A replicating portfolio of connected stocks outperforms nonconnected stocks by up to 7.
Returns are concentrated around corporate news announcements, consistent with portfolio managers gaining an informational advantage through the education networks. Our results suggest that social networks may be important mechanisms for information flow into asset prices. This pattern shows up even when the fund manager and the stock in question are located far apart, so it is distinct from anything having to do with local preference.
The evidence can be interpreted in terms of an epidemic model in which investors spread information about stocks to one another by word of mouth. It was found that direct interpersonal communications are very important in investor decisions. Questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word-of-mouth communications or other salient stimuli.
Randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically. Contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth. The survey evidence is interpreted as supporting such models. To do that, you need a theory about the thing that sporadically causes arbitrageur constraints to bind. I propose a first such theory, which is based on social interactions between speculators.
The theory says that bubbles should be more likely in assets where increases in past returns make excited-speculators relatively more persuasive to their peers. I empirically verify this ex ante prediction about bubble likelihoods and show that it is robust to some ex post disagreement about bubble definitions. I review the empirical literature on word of mouth WOM among investors. We offer a new social approach to investment decision making and asset prices.
We review an empirical literature that studies the role of social interactions in driving economic and financial decision-making. Using two proxies for investors' political affiliation, we document sharp differences in stock returns between firms likely dominated by Democratic investors blue stocks and those dominated by Republican investors red stocks during the COVID pandemic.
When approaching interpersonal first meetings e. I discuss a new intellectual paradigm, social economics and finance--the study of the social processes that shape economic thinking and behavior. This research examines how the positive or negative valence of proprietary information affects both the likelihood that people diffuse this information through their social networks and the likelihood that recipients' access to this information provides them with a source of comparative advantage.
This paper shows that the network of relationships between brokers and institutional investors shapes information diffusion in the stock market. Five studies explore the self-presentational consequences of refusing to "back down" -- that is, upholding a stance despite evidence of its inaccuracy. Stories people tell-about financial confidence or panic, housing booms, or Bitcoin-can go viral and powerfully affect economies, but such narratives have traditionally been ignored in economics and finance because they seem anecdotal and unscientific.
COVID, coronavirus, H1N1, Wuhan, Spanish flu, Spanish influenza, influenza, Ebola polio disease, flu epidemic, Great Recession, financial epidemic, pandemic, co-epidemic, contagion, market meltdown, stock crash, bubble, panic, epidemiology, world financial crisis, virality, disease, stimulus, fear, bank runs, bank failures, behavioral economics, consumer confidence, crowd psychology, crisis of confidence, crisis, mutation, conspiracy theories, fake news, false narratives, chaos theory, butterfly effect, John Maynard Keynes.
This paper exploits a novel hand-collected data set to provide a comprehensive analysis of the social relationships that underlie illegal insider trading networks.
|The forex formation is||Background Citations. Has PDF. This paper shows that the network of relationships between brokers and institutional investors shapes information diffusion in the stock market. Archival Empirical Investment Decisions Institutional. The result is nothing less than a new way to think about the economy, economic change, and economics. Taken together, these results suggest that although people believe using catering in interpersonal first meetings will lead to successful outcomes, the opposite is true: catering creates undesirable feelings of instrumentality for the caterer, increases anxiety, and ultimately hinders performance.|
|Strategy forex please forum||Informed Trading and Expected Returns. When drawing conclusions about managerial skill of these top performers, they neglect … Expand. This paper exploits a novel hand-collected data set to provide a comprehensive analysis of the social relationships that underlie illegal insider trading networks. Recent theoretical developments predict a negative relationship between … Expand. The probability of selling as a function of profit is V-shaped; at short holding periods, … Expand. Along the way, we describe a number of easily accessible recent data sets for the study of social interactions in finance, including the Social Connectedness Index, which measures the frequency of Facebook friendship links across geographies.|
|The objective of financial reporting places most emphasis on||971|
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|Self-enhancing transmission bias and active investing strategy||In contrast with nonsocial approaches, sociability, self-enhancing transmission, and other features of the communication process determine the popularity and pricing of active investment strategies. A period has more suspense if the variance of the next period's beliefs is greater. Forward-looking agents care about expected future utility flows, and hence have higher current felicity if they believe that … Expand. This paper exploits a novel hand-collected data set to provide a comprehensive analysis of the social relationships that underlie illegal insider trading networks. We offer a new social approach to investment decision making and asset prices. Unconditionally, active strategies e.|
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For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: email available below. Please note that corrections may take a couple of weeks to filter through the various RePEc services. Economic literature: papers , articles , software , chapters , books. FRED data. My bibliography Save this paper. Social Transmission Bias and Investor Behavior.
Registered: Bing Han David Hirshleifer. It is not easy to share the failures particularly because it put oneself in a vulnerable state and might deter others to invest. However, we still know that the good outweighs the bad right? True, it is not easy. Trying is the first step towards failure. We are imperfect because we are human.
There is simply no shame in being wrong, only in failing to correct our mistakes as every failure is a learning opportunity. Maxwell I assume the same applies to men. Rowling, author. The most worrying thing for me in not working is NOT, the not working per se, but the limiting of diverse human interaction.
This u have avoided by still catching up with ex-colleague. Thumbs up! Yes, sharing of successes only reminds me of Facebook where you will only see pictures of how good a person life is! I feel that acknowledging mistake not just by heart, but by the lips or thru words are very important too!
While working they just happened. Once I stopped working I have to actively seek them. I do not have a Facebook account, yippee. Wise indeed. Your email address will not be published. Save my name, email, and site URL in my browser for next time I post a comment. Yes, add me to your mailing list.
This site uses Akismet to reduce spam. Learn how your comment data is processed. Home Biases It happened again — Self-enhancing transmission bias. And it … But I am digressing. This fact of my all-too-lopsided answer to his question dawned on me only on my way home. According to the research they do. All of them. Avoid future crashes. How I learned about the stock markets — going way back in time.