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Asset Price Response to New Information

The Effects of Conservatism Bias and Representativeness Heuristic

  • Book
  • © 2014

Overview

Authors:
  1. Guo Ying Luo

    1. DeGroote School of Business, McMaster University, Hamilton, Canada

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  • First comprehensive text to discuss trading mechanisms from a behavioral finance perspective
  • Presents state-of-the-art research in market behavior and efficiency
  • Author is regarded as a leading expert in market microstructure theory and market selection
  • Includes supplementary material: sn.pub/extras

Part of the book series: SpringerBriefs in Finance (BRIEFSFINANCE)

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Table of contents (7 chapters)

  1. Front Matter

    Pages i-vii
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  2. Introduction

    • Guo Ying Luo
    Pages 1-4

  3. Conservatism Bias and Asset Price Overreaction or Underreaction to New Information in a Competitive Securities Market

    • Guo Ying Luo
    Pages 5-14

  4. Conservatism Bias and Asset Price Overreaction or Underreaction to New Information in the Presence of Strategic Interaction

    • Guo Ying Luo
    Pages 15-25

  5. Representativeness Heuristic and Asset Price Overreaction or Underreaction to New Information in a Competitive Securities Market

    • Guo Ying Luo
    Pages 27-39

  6. Representativeness Heuristic and Asset Price Overreaction or Underreaction to new Information in the Presence of Strategic Interaction

    • Guo Ying Luo
    Pages 41-51

  7. The Presence of Representativeness Heuristic and Conservatism Bias in an Asset Market

    • Guo Ying Luo
    Pages 53-63

  8. Conclusion

    • Guo Ying Luo
    Pages 65-65

  9. Back Matter

    Pages 67-70
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Keywords

About this book

Asset Price Response to New Information examines the effect of two types of psychological biases (namely, conservatism bias and representativeness heuristic) on the asset price reaction to new information. The author constructs various models of a competitive securities market or a security market allowing for strategic interaction among traders to prove rigorously that either conservatism or representativeness is capable of generating both asset price overreaction and underreaction to new information. The results shed some new insights on the phenomena of the asset price overreaction and underreaction to new information. In the literature, very little has been published in this area of behavioral finance. This volume will appeal to graduate-level students and researchers in finance, behavioral finance, and financial engineering.

Reviews

From the book reviews:

“The ideal readers of this book would be PhD students and professors in finance and economics, especially those who have a special interest in behavioral economics/finance. … this book provides a very nice theoretical contribution on how a simple behavioral bias such as conservatism or representativeness could result in both underreaction and overreaction simultaneously in a stylized two-period setting.” (Jianfeng Yu, Journal of Economic Literature, Vol. LII (4), December, 2014)

Authors and Affiliations

  • DeGroote School of Business, McMaster University, Hamilton, Canada

    Guo Ying Luo

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