COMMERCE 4AF3 Chapter Notes - Chapter 6: Autocorrelation, Motivated Reasoning, Efficient-Market Hypothesis
17 Nov 2017
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Document Summary
Chapter 6 - measurement approach of decision usefulness. Behavioural finance - study of behaviour based securities market inefficiencies. Behavioural characteristics that question investor rationality and market efficiency. Limited attention: investors concentrate on info readily available (bottom line) & ignore information from notes and else where in annual report because they do not have time, inclination or ability to process all publicly available information. Conservatism: investors retain excess weight on their prior beliefs. Overconfidence: overestimate the precision of info they collect themselves, thus underreacting to new info that is not self- collected relative to information that is esp. if info is perceived as statistical and abstract. Self-attribution bias: feeling that good decision outcomes are due their abilities and bad outcomes are results of unfortunate realization of states of nature, not their fault. Leads to share price momentum (reinforced confidence from increase ins share price, causing share price to rise further)
