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Nominal price illusion
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DOI：10.1016/j.jfineco.2016.01.027.png)
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摘要
En 中文
We explore the psychology of stock price levels and provide evidence that investors suffer from a nominal price illusion in which they overestimate the room to grow for low-priced stocks relative to high-priced stocks. While it has become increasingly clear that nominal price levels influence investor behavior, why prices matter to investors is a question that as of yet has gone unanswered. We find widespread evidence that investors systematically overestimate the skewness of low-priced stocks. In the broad cross-section of stocks, we find that investors substantially overweight the importance of price when forming skewness expectations. Asset pricing implications of our findings are borne out in the options market. A zero-cost option portfolio strategy that exploits investor overestimation of skewness for low-priced stocks generates significant abnormal returns. Finally, investor expectations of future skewness increase drastically on days that a stock undergoes a split to a lower nominal price. Empirically, however, future physical skewness decreases following splits. (C) 2016 Elsevier B.V. All rights reserved.
Keyword:
Nominal price
Skewness
Stock splits
Options
Behavioral finance
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12
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3.8K
被引数:
5.5W
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