Coherent Preferences and Price Reference Point Jumps in Stock Market

2017 ◽  
Author(s):  
Leilei Shi ◽  
Boris Podobnik ◽  
Andrea Fenu
Keyword(s):  
Stock Market ◽  
Reference Point ◽  
Price Reference

scholarly journals Investors’ Risk Preference Characteristics Based on Different Reference Point

2014 ◽  
Vol 2014 ◽  
pp. 1-9 ◽  
Author(s):  
Fenghua Wen ◽  
Zhifang He ◽  
Xu Gong ◽  
Aiming Liu
Keyword(s):  
Stock Market ◽  
Risk Aversion ◽  
Empirical Evidence ◽  
Reference Point ◽  
Risk Preference ◽  
Reference Points ◽  
Time Varying ◽  
Explanatory Variables ◽  
House Money Effect ◽  
Two Factors

Taking the stock market as a whole object, we assume that prior losses and gains are two different factors that can influence risk preference separately. The two factors are introduced as separate explanatory variables into the time-varying GARCH-M (TVRA-GARCH-M) model. Then, we redefine prior losses and gains by selecting different reference point to study investors’ time-varying risk preference. The empirical evidence shows that investors’ risk preference is time varying and is influenced by previous outcomes; the stock market as a whole exhibits house money effect; that is, prior gains can decrease investors’ risk aversion while prior losses increase their risk aversion. Besides, different reference points selected by investors will cause different valuation of prior losses and gains, thus affecting investors’ risk preference.

Cognitive Reflection Effects on Time Discounting

2018 ◽  
Vol 39 (2) ◽  
pp. 99-106 ◽  
Author(s):  
Michał Białek ◽  
Przemysław Sawicki
Keyword(s):  
Individual Differences ◽  
Individual Difference ◽  
Delay Discounting ◽  
Reference Point ◽  
Reference Points ◽  
Cognitive Reflection Test ◽  
Process Information ◽  
Time Discounting ◽  
Cognitive Reflection ◽  
The Way

Abstract. In this work, we investigated individual differences in cognitive reflection effects on delay discounting – a preference for smaller sooner over larger later payoff. People are claimed to prefer more these alternatives they considered first – so-called reference point – over the alternatives they considered later. Cognitive reflection affects the way individuals process information, with less reflective individuals relying predominantly on the first information they consider, thus, being more susceptible to reference points as compared to more reflective individuals. In Experiment 1, we confirmed that individuals who scored high on the Cognitive Reflection Test discount less strongly than less reflective individuals, but we also show that such individuals are less susceptible to imposed reference points. Experiment 2 replicated these findings additionally providing evidence that cognitive reflection predicts discounting strength and (in)dependency to reference points over and above individual difference in numeracy.

Predicting Stock Market Performance

2020 ◽  
pp. 1-10
Author(s):  
Thomas Plieger ◽  
Thomas Grünhage ◽  
Éilish Duke ◽  
Martin Reuter
Keyword(s):  
Stock Market ◽  
Risk Taking ◽  
Life Stress ◽  
Price Volatility ◽  
Individual Characteristics ◽  
Self Report ◽  
Financial Behavior ◽  
Market Simulation ◽  
Stock Market Performance ◽  
Risk Taking Behavior

Abstract. Gender and personality traits influence risk proneness in the context of financial decisions. However, most studies on this topic have relied on either self-report data or on artificial measures of financial risk-taking behavior. Our study aimed to identify relevant trading behaviors and personal characteristics related to trading success. N = 108 Caucasians took part in a three-week stock market simulation paradigm, in which they traded shares of eight fictional companies that differed in issue price, volatility, and outcome. Participants also completed questionnaires measuring personality, risk-taking behavior, and life stress. Our model showed that being male and scoring high on self-directedness led to more risky financial behavior, which in turn positively predicted success in the stock market simulation. The total model explained 39% of the variance in trading success, indicating a role for other factors in influencing trading behavior. Future studies should try to enrich our model to get a more accurate impression of the associations between individual characteristics and financially successful behavior in context of stock trading.

Comparison-Induced Evaluations Around a Reference Point

2008 ◽  
Author(s):  
Amber N. Bloomfield ◽  
Jessica M. Choplin
Keyword(s):  
Reference Point
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