Volume 3, Number 4, 2003 Abstracts
© Copyright Erlbaum 2002

Stock Analysts: Experts on Whose Behalf?
Brian Bruce-Panagora Asset Management

Investors rely on the opinions of experts to help us pick stocks. Whether one buys stocks through a 401(k) plan, or manage the mutual fund for individuals investing in the 401(k) the decision maker utilizes expert opinion. Those experts are supposed to be stock analysts. Recent scandals like Enron have caused these analysts to be much maligned. We will examine the role of those analysts, their motivations and the amount of useful information they provide.

The Perception of Dividends By Management
George Frankfurter-Louisiana State University, Sabanci University
Arman Kosedag-Sabanci University
Hartmut Schmidt-University of Hamburg
Mihail Topalov-University of Hamburg

The "dividend puzzle," i.e., the love stockholders have for dividends, has always been one of the great mysteries of modern finance/financial economics. Six classes of dividend theories have been advanced during the last five decades, almost all using the logic of the economic person. Unfortunately, all these models suffer from either a lack of verifiability or contradicting empirical evidence. This paper takes an approach that has been largely ignored so far by dividend research. Instead of analyzing large volumes of market data based on yet another "rational" model, we study the perception of dividends by top corporate decision-makers. The respondents' answers to a survey instrument are then analyzed and compared with accounting, economic, and market data. The results are surprising in terms of both similarity and dissimilarity of perception. We hope that our results and this type of research will open up new ways of looking at this puzzle.

"Buy on the Rumor:" Anticipatory Affect and Investor Behavior
Richard L. Peterson-San Mateo County Health Center

This article demonstrates a relationship between investor psychology and security pricing around anticipated events. Taking a multidisciplinary approach, we pull together research in the finance, psychology, and neuroscience literature. Event studies in the finance literature demonstrate anomalous security (stock, commodity, bond, or option) price movements around the dates of anticipated events. From the neuroscience literature we demonstrate correlations between reward anticipation and the arousal of affect (feelings, emotions, moods, attitudes, and preferences). From the cognitive psychology literature we extract evidence for the central role of affect in motivating investing behavior. We briefly outline an investment strategy for exploiting the event-related security price pattern described by the trading strategy "buy on the rumor and sell on the news."

Hindsight Bias and Individual Risk Attitude within the Context of Experimental Asset Markets
Tarek El-Sehity-University of Vienna
Hans Haumer-Wealth Architecture Ltd.
Christian Helmenstein-Institute for Advanced Studies
Erich Kirchler-University of Vienna
Boris Maciejovsky-Max Planck Institute for Research into Economic Systems

This paper investigates the robustness of hindsight bias in experimental asset markets, the time-invariance of the different experimental risk elicitation methods of certainty equivalents and binary lottery choices, and their correspondence. The results of our within-subject approach with 133 traders do not support the conjecture that hindsight bias is a general phenomenon. Furthermore, our findings challenge the presumption of time-stable risk preferences and of procedural invariance with respect to different experimental risk elicitation methods.

Mad Cows, Mad Corn, & Mad Money: Applying What We Know About the Perceived Risk of Technologies to the Perceived Risk of Securities
Melissa L. Finucane-Kaiser Permanente Center for Health Research, Hawaii

Thirty years of research has shown that the concept of risk in people's minds is complex and influenced by many factors. Lessons learned from studies on the perceived risk of technologies and activities (such as eating British beef or genetically modified food) are applied to the perceived risk of securities. How investors may be affected by qualitative dimensions of risk, affect and imagery, and socio-political attitudes and values, are highlighted. Specific recommendations are given for improving portfolio management with a qualitative, multi-dimensional, values-based approach that complements more traditional approaches to analysis of securities.

Research Elsewhere
Robert A. Olsen-Decision Research

Book Reviews
Robert A. Olsen-Decision Research