Individuals neglect the informational role of prices: evidence from the stock market

• Autor(a) principal: Chague, Fernando Daniel
• Data de Publicação: 2018
• Outros Autores: Bueno, Rodrigo de Losso da Silveira, Giovannetti, Bruno Cara
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional do FGV (FGV Repositório Digital)
• Texto Completo: http://hdl.handle.net/10438/20182
• topic: Individual investors; Cursed beliefs; Contrarian behavior; Trading volume; Left-digit effect; Economia; Mercado de capitais; Ações (Finanças) - Preços

We find that a stock price fall in itself induces individual investors to buy the stock. That is, individuals neglect the negative information that may be attached to a stock price fall. Our identification strategy uses two distinct events which generate fictitious price falls. The first is the mechanical stock price adjustment on ex-dividend dates. The second explores the so-called left-digit effect, the well-documented empirical fact that individuals disproportionally focus on left digits when evaluating numbers. Our results contribute to the understanding of why people trade.