Behavioral-Finance-and-T課件(PPT 65頁)

1、CHAPTER 12Behavioral Finance and Technical Analysis第1頁，共65頁。Behavioral FinanceConventional FinancePrices are correct; equal to intrinsic value. Resources are allocated efficiently.Consistent with EMHBehavioral FinanceWhat if investors dont behave rationally?2第2頁，共65頁。The Behavioral CritiqueTwo categ

2、ories of irrationalities:Investors do not always process information correctly.Result: Incorrect probability distributions of future returns.Even when given a probability distribution of returns, investors may make inconsistent or suboptimal decisions.Result: They have behavioral biases.3第3頁，共65頁。Er

3、rors in Information Processing: Misestimating True ProbabilitiesForecasting Errors: Too much weight is placed on recent experiences.Overconfidence: Investors overestimate their abilities and the precision of their forecasts.Conservatism: Investors are slow to update their beliefs and under react to

4、new information. Sample Size Neglect and Representativeness: Investors are too quick to infer a pattern or trend from a small sample.4第4頁，共65頁。Behavioral BiasesBiases result in less than rational decisions, even with perfect information.Examples: Framing: How the risk is described, “risky losses” vs

5、. “risky gains”, can affect investor decisions.5第5頁，共65頁。Behavioral BiasesMental Accounting:Investors may segregate accounts or monies and take risks with their gains that they would not take with their principal.Regret Avoidance:Investors blame themselves more when an unconventional or risky bet tu

6、rns out badly.6第6頁，共65頁。Behavioral BiasesProspect Theory:Conventional view: Utility depends on level of wealth. Behavioral view: Utility depends on changes in current wealth.7第7頁，共65頁。Figure 12.1 Prospect Theory8第8頁，共65頁。Limits to ArbitrageBehavioral biases would not matter if rational arbitrageurs

7、could fully exploit the mistakes of behavioral investors.Fundamental Risk: “Markets can remain irrational longer than you can remain solvent.”Intrinsic value and market value may take too long to converge.9第9頁，共65頁。Limits to ArbitrageImplementation Costs:Transactions costs and restrictions on short

8、selling can limit arbitrage activity.Model Risk:What if you have a bad model and the market value is actually correct?10第10頁，共65頁。Limits to Arbitrage and the Law of One PriceSiamese Twin CompaniesRoyal Dutch should sell for 1.5 times ShellHave deviated from parity ratio for extended periodsExample o

9、f fundamental risk11第11頁，共65頁。Figure 12.2 Pricing of Royal Dutch Relative to Shell (Deviation from Parity)12第12頁，共65頁。Limits to Arbitrage and the Law of One PriceEquity Carve-outs3Com and PalmArbitrage limited by availability of shares for shortingClosed-End FundsMay sell at premium or discount to N

10、AVCan also be explained by rational return expectations13第13頁，共65頁。Bubbles and Behavioral EconomicsBubbles are easier to spot after they end.Dot-com bubbleHousing bubble14第14頁，共65頁。Bubbles and Behavioral EconomicsRational explanation for stock market bubble using the dividend discount model:S&P 500

11、is worth $12,883 million if dividend growth rate is 8% (close to actual value in 2000).S&P 500 is worth $8,589 million if dividend growth rate is 7.4% (close to actual value in 2002).15第15頁，共65頁。Technical Analysis and Behavioral FinanceTechnical analysis attempts to exploit recurring and predictable

12、 patterns in stock prices.Prices adjust gradually to a new equilibrium.Market values and intrinsic values converge slowly. 16第16頁，共65頁。Technical Analysis and Behavioral FinanceDisposition effect: The tendency of investors to hold on to losing investments.Demand for shares depends on price historyCan

13、 lead to momentum in stock prices17第17頁，共65頁。Trends and Corrections: The Search for MomentumDow TheoryPrimary trend : Long-term movement of prices, lasting from several months to several years.Secondary or intermediate trend: short-term deviations of prices from the underlying trend line and are eli

14、minated by corrections.Tertiary or minor trends: Daily fluctuations of little importance.18第18頁，共65頁。Figure 12.3 Dow Theory Trends19第19頁，共65頁。Trends and Corrections: Moving AveragesThe moving average is the average level of prices over a given interval of time.Bullish signal: Market price breaks thr

15、ough the moving average line from below. Time to buyBearish signal: When prices fall below the moving average, it is time to sell.20第20頁，共65頁。Figure 12.5 Moving Average for HPQ21第21頁，共65頁。Trends and Corrections: Breadth Breadth: Often measured as the spread between the number of stocks that advance

16、and decline in price.22第22頁，共65頁。Sentiment Indicators: Trin StatisticTrin Statistic:Ratios above 1.0 are bearish23第23頁，共65頁。Sentiment Indicators: Confidence IndexConfidence index: The ratio of the average yield on 10 top-rated corporate bonds divided by the average yield on 10 intermediate-grade cor

17、porate bonds.Higher values are bullish.24第24頁，共65頁。Sentiment Indicators: Put/Call RatioCalls are the right to buy.A way to bet on rising pricesPuts are the right to sell.A way to bet on falling pricesA rising ratio may signal investor pessimism and a coming market decline.Contrarian investors see a

18、rising ratio as a buying opportunity!25第25頁，共65頁。Warning!It is possible to perceive patterns that really dont exist.Figure 12.8A is based on the real data. The graph in panel B was generated using “returns” created by a random-number generator.Figure 12.9 shows obvious randomness in the weekly price

19、 changes behind the two panels in Figure 12.826第26頁，共65頁。Figure 12.8 Actual and Simulated Levels for Stock Market Prices of 52 Weeks27第27頁，共65頁。Figure 12.9 Actual and Simulated Changes in Stock Prices for 52 Weeks 28第28頁，共65頁。CHAPTER 13Empirical Evidence on Security Returns29第29頁，共65頁。Overview of In

20、vestigationReturn-beta relationships are widely used in actual financial practice.The CAPM predicts expected rates of return on assets, relative to a market portfolio of all risky assets.30第30頁，共65頁。Overview of InvestigationA multifactor capital market usually is postulated. A broad market index (e.

21、g. the S&P 500) represents one of the factors.Well diversified portfolios are often substituted for individual securities.To overcome CAPM testing difficulties:31第31頁，共65頁。The Index Model and the Single-Factor APTExpected Return-Beta RelationshipEstimating the SCL32第32頁，共65頁。Tests of the CAPMTests o

22、f the expected return beta relationship: First Pass RegressionEstimate beta, average risk premiums and nonsystematic riskSecond PassUse estimates from the first pass to see if model is supported by the dataSML slope is “too flat” and intercept is “too high”.33第33頁，共65頁。Single Factor Test ResultsRetu

23、rn %BetaCAPMEstimated SML34第34頁，共65頁。Rolls CriticismThe only testable hypothesis is whether the market portfolio is mean-variance efficient.Sample betas conform to the SML relationship because all samples contain an infinite number of ex post mean-variance efficient portfolios.CAPM is not testable u

24、nless we know the exact composition of the true market portfolio and use it in the tests.Benchmark error due to proxy for M35第35頁，共65頁。Measurement Error in BetaProblem: If beta is measured with error, then the slope coefficient of the regression equation will be biased downward and the intercept bia

25、sed upward.Solution: Replace individual assets with a set of portfolios with small nonsystematic components and widely spaced betas.Fama and MacBeth36第36頁，共65頁。Table 13.1 Summary of Fama and MacBeth37第37頁，共65頁。Summary of CAPM TestsExpected rates of return are linear and increase with beta, the measu

26、re of systematic risk.Expected rates of return are not affected by nonsystematic risk.38第38頁，共65頁。Human Capital and Cyclical Variationsin Asset BetasJagannathan and Wang study shows two important deficiencies in tests of the single-index model:Many assets are not traded, notably, human capital. A hu

27、man capital factor may be important in explaining returns.Betas are cyclical.39第39頁，共65頁。Table 13.2 Evaluation of Various CAPM Specifications40第40頁，共65頁。Table 13.3 Determinants of Stockholdings41第41頁，共65頁。Tests of the Multifactor ModelWhich factors or sources of risk should have risk premiums?CAPM a

28、nd APT do not tell us!42第42頁，共65頁。Tests of the Multifactor ModelChen, Roll and Ross 1986 StudyFactorsGrowth rate in industrial productionChanges in expected inflationUnexpected inflationUnexpected changes in risk premiums on bondsUnexpected changes in term premium on bonds43第43頁，共65頁。Study Structure

29、 & ResultsMethod: Two-stage regression with portfolios constructed by size based on market value of equitySignificant factors: industrial production, risk premium on bonds and unanticipated inflationMarket index returns were not statistically significant in the multifactor model44第44頁，共65頁。Fama-Fren

30、ch Three Factor ModelSize and book-to-market ratios explain returns on securities.Smaller firms experience higher returns.High book to market firms experience higher returns (value style).Returns are explained by size, book to market and by beta.45第45頁，共65頁。Interpretation of Three-Factor ModelSize a

31、nd value are priced risk factors, consistent with APT.Alternatively, premiums could be due to investor irrationality or behavioral biases.46第46頁，共65頁。Risk-Based InterpretationsLiew and VassalouStyle seems to predict GDP growth and relate to the business cycle.Petkova and ZhangWhen the economy is exp

32、anding, value beta growth beta47第47頁，共65頁。Figure 13.1 Difference in Return to Factor Portfolios48第48頁，共65頁。Figure 13.2 HML Beta in Different Economic States49第49頁，共65頁。Behavioral Explanations for Value Premium“Glamour firms” are characterized by recent good performance, high prices, and lower book-t

33、o-market ratios.High prices reflect excessive optimism plus overreaction and extrapolation of good news.Chan, Karceski and Lakonishok LaPorta, Lakonishok, Shleifer and Vishny50第50頁，共65頁。Figure 13.3 The Book-to-Market Ratio51第51頁，共65頁。Figure 13.4 Value minus Glamour Returns Surrounding Earnings Annou

34、ncements52第52頁，共65頁。Momentum: A Fourth FactorThe original Fama-French model augmented with a momentum factor has become a common four-factor model used to evaluate abnormal performance of a stock portfolio.Momentum may be related to liquidity.53第53頁，共65頁。Liquidity and Asset PricingLiquidity involves

35、 trading costs, ease of sale, necessary price concessions to effect a quick transaction, market depth, price predictability.54第54頁，共65頁。Liquidity and Asset PricingPstor and Stambaugh studied price reversals.Conclusion: Liquidity risk is a priced factor.Price reversals may occur when traders have to

36、offer higher purchase prices or accept lower selling prices to complete their trades in a timely manner.55第55頁，共65頁。Liquidity and Efficient Market AnomaliesPstor and Stambaugh suggest that the liquidity risk factor may account for the profitability of the momentum strategy.Sadka shows that the liqui

37、dity risk premium explains 40-80% of the abnormal returns to the momentum and postearnings announcement drift strategies.56第56頁，共65頁。Equity Premium PuzzleThe equity premium puzzle says :historical excess returns are too highand/or our usual estimates of risk aversion are too low.57第57頁，共65頁。Consumpt

38、ion Growth and Market Rates of ReturnWhat matters to investors is not their wealth per se, but their lifetime flow of consumption.Measure risk as the covariance of returns with aggregate consumption.58第58頁，共65頁。Consumption Growth and Market Rates of ReturnThe lower panel of Table 13.6 shows:a high book-to-market ratio is associated with a higher consumption betalarger firm size is associated with a lower consumption beta.59第59頁，共65頁。Table 13.6 Annual Exc