Open AccessA Behavioral Approach To Stock Pricing
Author(s) -
Jayash Paudel,
Judy Laux
Publication year - 2010
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v26i3.298
Subject(s) - stock (firearms) , behavioral economics , economics , style (visual arts) , animal spirits , monetary economics , financial economics , psychology , finance , social psychology , literature , history , art , archaeology
Recent literature in behavioral finance has contradicted the notion of efficiency of markets. Greater emphasis on how psychological biases influence both the behavior of investors and asset prices has led to a strong debate among proponents of behavioral finance and neoclassical finance. This has created the need to study how psychology affects financial decisions in households, markets and organizations. This study conducts a pooled ordinary least squares (OLS) model using the fixed effects estimator to investigate the linkage between investor sentiment and stock prices for 35 firms belonging to three different industries over a time period of 56 years, from 1950 to 2005. The findings suggest that investor sentiment does not significantly affect the stock prices in this sample.