Herd behavior and mood: An experimental study on the forecasting of share prices

Filiz, Ibrahim; Nahmer, Thomas; Spiwoks, Markus

doi:10.1016/j.jbef.2019.07.004

Cited by 21 publications

(10 citation statements)

References 94 publications

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“…Realizing the significant role played by the social mood in influencing the financial decision-making process and the risk tolerance behavior the investors highlighted multiple external and internal motivators that cause their mood to change. Many studies explain the impact of social media such as Twitter (Saurabh and Dey, 2020;Ruan et al, 2018;Bollen et al, 2011) or views posted on micro-blogs (Oliveira et al, 2013;Li et al, 2019) on the stock market indices (Filiz et al, 2019;Prechter et al, 2012). Heo et al (2021) studied the impact of COVID-19 on FRT and concluded that the pandemic has shifted risk tolerance downward for the majority of financial decision-makers in this study.…”

Section: Discussionmentioning

confidence: 85%

A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy

Asad

Toqeer

Mahmood

2021

QRFM

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Purpose The authors design a theoretical perspective that explores how different phases of social mood influence financial risk tolerance (FRT) among investors. Risk is involved in almost all financial decision-making. For a better understanding of risk tolerance behavior, the role played by social mood cannot be ignored. This study aims to explore the linkage between social mood and FRT of investors in Pakistan. Design/methodology/approach Using qualitative phenomenology as the guiding framework, 22 interviews were conducted to have a deeper understanding of the lived experiences of investors with at least 10 years of investment experience. Thematic analysis was done to analyze data. Audio-recording, bracketing, triangulation and member checking were done to ensure validity and reliability. Findings A theoretical model is developed using the six themes identified through thematic analysis. This model presents an in-depth analysis of the determinants of social mood, its multiple phases and its impact on risk tolerance behavior. Findings reveal that the level of financial literacy, experience and purpose of investment moderate the effect of social mood on FRT. Practical implications Investors can manage risk and increase their profits by controlling the effects of social mood. They can benefit from the market situation by taking more risk when the market is extremely low. The advisors can frame their advice in the light of the model. Originality/value According to the authors’ knowledge, this is the first study that explores investors’ risk tolerance in response to variations in social mood in the context of an emerging economy. The paper has contributed conceptually and methodologically. It uses phenomenology as the method and develops a theoretical model that describes how different types of investors adjust their risk tolerance in response to changes in their social mood.

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Section: Discussionmentioning

confidence: 85%

A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy

Asad

Toqeer

Mahmood

2021

QRFM

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“…Filiz, Nahmer, & Spiwoks [7] investigates the effect of emotions on the tendency towards herding behavior. Three therapies are used in a between-subjects configuration (neutral, optimisticб and pessimistic mood).…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Herding Behavior on Stock Mispricing: The Case of Listed Companies at the Egyptian Exchange

Alber

Ezzat

2021

EJBMR

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This paper aims at examining the impact of herding behavior on stock mispricing. Herding behavior is measured by Cross Sectional of Standard Deviation (CSSD), while stock mispricing is measured by the difference between the market value and intrinsic value of stock. This has been conducted using a sample of 24 companies are listed at the Egyptian exchange during the period from 2002 to 2018. Results indicate there is a significant effect of herd behavior on stock mispricing in a bivariate context, while the effect remains significant, even after controlling for inflation rate and discount rate. Besides, the discount rates don’t seem to have any significant effects on stock mispricing.

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“…Secondly, the particularity of China's financial market induces herd effect. [1] First of all, China's individual investors have a large number, but low level of education. According to the data, more than 195 million people invested in the Shanghai and Shenzhen stock markets in 2017, 43.81% had a high school education or less.…”

Section: Herd Behaviormentioning

confidence: 99%

Research and Analysis on Herd Behavior of Individual Investors

Chen¹

2021

Proceedings of the 6th International Conference on Financial Innovation and Economic Development (ICFIED 2021)

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Based on the development of China's financial market later than the western markets, the professional level of individual investors and market supervision are undeveloped than the western markets. In the process of capital market gradually internationalization, China's individual investors are face some problems which will be reflected in herd behavioral effects. In the investment market, herd behavior refers to the phenomenon of individuals giving up their own ideas, and their own information to make investment decisions consistent with the group's investment decisions. Generally speaking, individual investors buy blindly when the stock trading volume clearly increases, but blindly sell when the stock trading volume obviously declines that resulting in large fluctuations in stock prices. This paper analyzes the influence of herd behavior on individual investors by two cases. It focuses on the particularity of China's financial market analysis. It analyzes and compares specific positive and negative effects of the herd behavioral caused by individual investors. Individual investors should fully aware of their strengths and weaknesses on investment strategies. There is little chance of absolute reasonable. In order to avoid losses, individual investors should improve their judge abilities and keep a clear thinking. As for the regulators, they should increase investment education for individual investors, promote rational investment, open markets and improve institutions.

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Herd behavior and mood: An experimental study on the forecasting of share prices

Cited by 21 publications

References 94 publications

A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy

A qualitative phenomenological exploration of social mood and investors’ risk tolerance in an emerging economy

The Impact of Herding Behavior on Stock Mispricing: The Case of Listed Companies at the Egyptian Exchange

Research and Analysis on Herd Behavior of Individual Investors

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