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dc.contributor.author
Galanidis, Iordanis
en
dc.date.accessioned
2017-01-31T07:43:14Z
dc.date.available
2017-02-01T01:00:18Z
dc.date.issued
2017-01-31
dc.identifier.uri
https://repository.ihu.edu.gr//xmlui/handle/11544/15067
dc.rights
Default License
dc.subject
Behavioral Finance
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dc.subject
Trading Volume
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dc.subject
Capital Markets
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dc.subject
PIIGS Crisis
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dc.title
The effect of Behavioral Finance on Capital Markets. The case of PIIGS (Portugal, Italy, Ireland, Greece, Spain).
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heal.type
masterThesis
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heal.secondaryTitle
The case of PIIGS (Portugal, Italy, Ireland, Greece, Spain)
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heal.classification
Finance
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heal.keywordURI.LCSH
Investments--Psychological aspects
heal.keywordURI.LCSH
Investments--Decision making
heal.keywordURI.LCSH
Capital market--Psychological aspects
heal.language
en
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heal.access
free
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heal.license
http://creativecommons.org/licenses/by-nc/4.0
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heal.references
Akerlof G.A. and Shiller R.J., (2009), “Animal Spirits: How Humans Psychology drives the economy”, Princeton University Press. Barber, B. M., Odean, T. (2008), “All that Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors”’, The Review of Financial Studies, 21 (2): 785-818. Barberis N., Shleifer A., and Vishny, R., (1998), “A model of investor sentiment”, Journal of Financial Economics, vol. 49. pp. 307-343. Baker, K.H. (2010), “Behavioral Finance: Investors, Corporations, and Markets”, New Jersey: John Wiley & Sons, pp. 26 – 32. De Bondt, W. (1998), “A portrait of the individual investor”, European Economic Review, 42(3-5), 831-844. De Bondt W. and Thaler R., (1995), “Financial decision making in markets and firms: A behavior perspective”, Handbooks in Operations Research and Management Science, vol. 9, Finance, pp. 383-410. Dhaoui, A., (2011), “What does Matter in Economy Today: Between Rationality and Animal Spirits”, University of Sousse, Faculty of Economic Sciences and Management. Fama, E. (1965), “Random Walks in Stock Market Prices”, Financial Analysts Journal. Fama, E.(1998), “Market efficiency, long-term returns, and behavioral finance”, Journal of Financial Economics 49, pp. 283-306. Fromlet, H (2001), “Behavioral Finance – Theory and Practical Application”, Business Economics (36) No 3, pp. 63-69. Gribnikov, V and Shevchenko, D. (2012), ‘’Influence of Behavioral Finance on the Share Market, Market risk and financial markets modeling’’, Berlin: Springer, pp. 57–61. Houthakker, H. and Williamson, P. (1996), ‘’The Economics of Financial Markets’’, Oxford University Press, New-York. Kahneman, D., & Tversky, A. (1979), “Prospect theory: An analysis of decision under risk”, Econometrica, 47, 263-291. Kahneman, D. (2003), “Maps of bounded rationality: Psychology for behavioral economics”, The American Economic Review, 93, 1449-1475. 30 Keren, G. (1991), “Calibration and probability judgments: Conceptual and methodological issues”, Acta Psychologica 77, 217-273. Kliger, D. & Kudryavtsev, A. (2010), “The Availability Heuristic and Investors' Reaction to Company- Specific Event”, Journal of Behavioral Finance, Vol. 11, issue 1, 50 – 65. Lichtenstein S., Fischhoff B. & Phillips L. (1982), “Calibration of probabilities: The state of the art to 1980”, Cambridge University Press, 306-334. Muth J., (1961), “Rational Expectations and the Theory of Price Movements”, Econometrica, Volume 29, Issue 3, 315-335. Mandelbrot B. B. & Hudson, R. L. (2004), ‘’The (mis) Behavior of Markets: A Fractal View of Risk’’, Ruin and Reward. Markowitz, H. (2010). “Portfolio Theory: As I Still See It.” Annual Review of Financial Economists, vol. 14, pp 23. Neumann, J. and Morgenstern, O. (1944), ‘’Theory of Games and Economic Behavior’’, Princeton University Press. Opreana C., and Tanasescu C., (2014), “Effects of Behavioral Finance on Capital Markets”, Procedia Economics and Finance, 748-785. Papathanasiou S., Vasiliou D and Eriotis N. (2015), “Back to the Future. A Behavioral Perspective on Technical Analysis into PIGS Countries”, Annals of Management Science, vol.4. Pompian, M. and Longo, J. M (2004), ‘’A New Paradigm for Practical Application of Behavioral Finance’’, The Journal of Wealth Management, pp. 9–15. Peters, E. E. (1991), ‘’Chaos and order in the capital markets. A new view of cycle, prices and market volatility’’, J. Wiley. R. Ritter, (2013), “Behavioral finance”, Pacific-Basin Finance Journal Vol. 11, No. 4, pp. 429-437. Shefrin, H. (1999), ‘’Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing’’, Boston, Harvard Business School Press. Shefrin, H., & Statman, M. (2000), ‘’Behavioral portfolio theory’’, Journal of financial and quantitative analysis, 35(02), pp. 127-151. Statman, M (1999), ‘’Behavioral Finance: Past Battles, Future Engagements’’, Financial Analysts Journal, vol. 55, no. 6, pp. 18-27. 31 Szyszka, A. (2010), “Belief and preference based models. Behavioral Finance. Investors, Corporations and Markets”. 351-372. Thaler, R. (1999), “Mental accounting matters”, Journal of Behavioral Decision Making, 12, 183-206. Tilson, W. (2004), ‘’Applying Behavioral Finance to Value Investing’’, Partners LLC.
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heal.fileFormat
pdf
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heal.recordProvider
School of Economics, Business Administration and Legal Studies, MSc in Banking and Finance
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heal.publicationDate
2017-01-25
heal.abstract
This dissertation is submitted for the degree of Master of Science (MSc) in Banking & Finance at the International Hellenic University.
This research investigates the presence of behavioral finance phenomena in five members of the European Union known as PIIGS (Portugal, Italy, Ireland, Greece, and Spain). According to the behavioral finance point of view it is easier to comprehend how investors will counteract. To elaborate, the paper provides evidence for empirical testing including four independent variables on the variability of trading volume. Daily returns of the PSI – 20 Index (Portugal Stock Exchange), the FTSEMIB Index (Italian Stock Exchange), the Irish Stock Exchange named ISEQ 20, the General Index of Athens Stock Exchange and the IBEX35 Index (Spanish Stock Exchange) are reported.
In the sample, data for five different capital markets over the period from January 01, 2010 to December 31, 2015 were analyzed. Our approach in the analysis suggests that investor’s decision making process is influenced by both psychological and emotional factors. Moreover, business is affected by investor’s illogical behavior so the assumption can be discarded for the considered markets.
I would like to take this opportunity to express my gratitude to everyone who supported me throughout my Master’s in Banking and Finance. My sincere appreciation to my supervisor, Prof. Christos Alexakis for his precious instructions and assistance. Furthermore, I would like to thank all my professors. Thus, I would like to thank my beloved family for supporting me.
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heal.tableOfContents
Abstract ................................................................................................................................................. III
1. Introduction ................................................................................................................................... 1
2. The PIIGS Crisis ................................................................................................................................... 3
2.1 Portugal .........................................................................................................................................3
2.2 Italy ................................................................................................................................................4
2.3 Ireland ...........................................................................................................................................5
2.4 Greece ...........................................................................................................................................6
2.5 Spain ..............................................................................................................................................7
3. Theoretical Background and Empirical Evidence ............................................................................... 9
3.1 Behavioral Anatomy of the Financial Crisis ....................................................................................9
3.1.1 Macroeconomic Environment ................................................................................................ 9
3.1.2 Greed of Investors and Managers .......................................................................................... 9
3.1.3 Underestimation of Risk ....................................................................................................... 10
3.2 Behavioral Finance and Decision Making Process....................................................................... 10
3.3 Cognitive Psychology ................................................................................................................... 11
3.3.1 Heuristics .............................................................................................................................. 12
3.3.2 Overconfidence .................................................................................................................... 12
3.3.3 Mental Accounting ............................................................................................................... 12
3.3.4 Framing Effect ...................................................................................................................... 13
3.3.5 Representativeness .............................................................................................................. 13
3.3.6 Conservatism ........................................................................................................................ 14
3.3.7 Disposition Effect .................................................................................................................. 14
3.3.8 Loss Aversion ........................................................................................................................ 15
3.4 The impact of Behavioral Finance on Capital Markets ................................................................ 15
4. Sample Period and Research Design ................................................................................................ 17
4.1 Sample Period and Data Collection ............................................................................................. 17
4.2 Capital Markets Investigated ....................................................................................................... 17
4.3 Proxy for used variables and Empirical Model specifications ..................................................... 18
5. Empirical Results ........................................................................................................................... 21
5.1 Descriptive Statistics .............................................................................................................. 21
5.2 Test of Stationary ................................................................................................................... 22
5.3 Regression Analysis ................................................................................................................ 23
6. Concluding Remarks and Limitations ........................................................................................... 27
7. References.................................................................................................................................... 29
Appendix ................................................................................................................................................ 1
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heal.advisorName
Alexakis, Christos
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heal.committeeMemberName
Dasilas, Apostolos
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heal.committeeMemberName
Archontakis, Fragiskos
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heal.academicPublisher
IHU
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heal.academicPublisherID
ihu
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heal.numberOfPages
46
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heal.spatialCoverage
Southern Europe
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heal.spatialCoverage
Portugal
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heal.spatialCoverage
Italy
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heal.spatialCoverage
Ireland
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heal.spatialCoverage
Greece
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heal.spatialCoverage
Spain
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