1. A Heterogeneous Behavioral Decision Model According to Binary Classification
- Author
-
Da-yong Zhang and Hong-wei Song
- Subjects
Microeconomics ,Empirical research ,Risk aversion ,Economics ,Capital asset pricing model ,Behavioral pattern ,Stock market ,Investment (macroeconomics) ,Capital market ,Decision model - Abstract
The paper separates the investors in stock market into informed traders and uninformed traders according to the characteristic of the investor heterogeneity, which denies the classical capital market theories' assumption that investors are homogenous. Firstly, the assumption is made that two kinds of investors have respective forms of behavioral decision models which the irrational expectation and the irrational risk aversion are leaded into. Secondly, the difference of reaction strength and behavioral pattern is tested between the two kinds of investors by Event Study Methodology. Finally, verify the rationality of binary classification in behavioral decision model. It has been found through empirical research on Chinapsilas capital market that a body of evidence with systematic patterns can not be easily explained with rational asset pricing models.
- Published
- 2008
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