Risk of beta: Evidence from Prospect Theory
According to Prospect Theory, Investors have different behaviors in theprofit and loss situations and indeed their trading behavior is different in bulland bear markets. This study uses quantile regression model (in differentquartiles) and OLS model to estimate beta of 180 firms. Results showed that...
| Main Authors: | , , |
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| Format: | Article |
| Language: | fas |
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Allameh Tabataba'i University Press
2015-03-01
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| Series: | مطالعات تجربی حسابداری مالی |
| Subjects: | |
| Online Access: | https://qjma.atu.ac.ir/article_1719_ae80b9f1f877c24b305cc45cfe7a7bda.pdf |
| _version_ | 1797378295891755008 |
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| author | Ali Saghafi Roohollah Farhadi Mohammad Taghi Taghavi Fard |
| author_facet | Ali Saghafi Roohollah Farhadi Mohammad Taghi Taghavi Fard |
| author_sort | Ali Saghafi |
| collection | DOAJ |
| description | According to Prospect Theory, Investors have different behaviors in theprofit and loss situations and indeed their trading behavior is different in bulland bear markets. This study uses quantile regression model (in differentquartiles) and OLS model to estimate beta of 180 firms. Results showed thatfirst, equity total risk (standard deviation) increase in Upper quartile andsecond, stocks beta changes in different quartiles and by moving fromquartile 0.25 to quartile 0.75, systematic risk (beta) increases significantly.Linear regression model and Quantile regression model show also thatunexpected variance can explain excess return at least similar to expectedvariance. The results can also be interpreted with both Insight of standardfinance and insight of behavioral finance. In standard finance area, riskreturnpositive relation that exists in upper quintiles is consistent with longrun growth of economy. Moreover, negative relation between return and riskin lower quintiles imply more uncertainty and as a result causing stockreturns to fall. In behavioral finance area, regime-dependent behavior ofslope coefficients is consistent with prediction of Prospect theory ofinvestor’s behaviors around the reference point. |
| first_indexed | 2024-03-08T20:05:48Z |
| format | Article |
| id | doaj.art-15114c0624ef4f5c96b51f37b464e97d |
| institution | Directory Open Access Journal |
| issn | 2821-0166 2538-2519 |
| language | fas |
| last_indexed | 2024-03-08T20:05:48Z |
| publishDate | 2015-03-01 |
| publisher | Allameh Tabataba'i University Press |
| record_format | Article |
| series | مطالعات تجربی حسابداری مالی |
| spelling | doaj.art-15114c0624ef4f5c96b51f37b464e97d2023-12-23T10:35:57ZfasAllameh Tabataba'i University Pressمطالعات تجربی حسابداری مالی2821-01662538-25192015-03-0112459381719Risk of beta: Evidence from Prospect TheoryAli Saghafi0Roohollah Farhadi1Mohammad Taghi Taghavi Fard2Professor, Allameh Tabataba’i University,PhD Student, Allameh Tabataba’i UniversityAssociate Professor, Allameh Tabataba’i UniversityAccording to Prospect Theory, Investors have different behaviors in theprofit and loss situations and indeed their trading behavior is different in bulland bear markets. This study uses quantile regression model (in differentquartiles) and OLS model to estimate beta of 180 firms. Results showed thatfirst, equity total risk (standard deviation) increase in Upper quartile andsecond, stocks beta changes in different quartiles and by moving fromquartile 0.25 to quartile 0.75, systematic risk (beta) increases significantly.Linear regression model and Quantile regression model show also thatunexpected variance can explain excess return at least similar to expectedvariance. The results can also be interpreted with both Insight of standardfinance and insight of behavioral finance. In standard finance area, riskreturnpositive relation that exists in upper quintiles is consistent with longrun growth of economy. Moreover, negative relation between return and riskin lower quintiles imply more uncertainty and as a result causing stockreturns to fall. In behavioral finance area, regime-dependent behavior ofslope coefficients is consistent with prediction of Prospect theory ofinvestor’s behaviors around the reference point.https://qjma.atu.ac.ir/article_1719_ae80b9f1f877c24b305cc45cfe7a7bda.pdfprospect theoryquantile regressionunexpected varianceexpected variancereference point |
| spellingShingle | Ali Saghafi Roohollah Farhadi Mohammad Taghi Taghavi Fard Risk of beta: Evidence from Prospect Theory مطالعات تجربی حسابداری مالی prospect theory quantile regression unexpected variance expected variance reference point |
| title | Risk of beta: Evidence from Prospect Theory |
| title_full | Risk of beta: Evidence from Prospect Theory |
| title_fullStr | Risk of beta: Evidence from Prospect Theory |
| title_full_unstemmed | Risk of beta: Evidence from Prospect Theory |
| title_short | Risk of beta: Evidence from Prospect Theory |
| title_sort | risk of beta evidence from prospect theory |
| topic | prospect theory quantile regression unexpected variance expected variance reference point |
| url | https://qjma.atu.ac.ir/article_1719_ae80b9f1f877c24b305cc45cfe7a7bda.pdf |
| work_keys_str_mv | AT alisaghafi riskofbetaevidencefromprospecttheory AT roohollahfarhadi riskofbetaevidencefromprospecttheory AT mohammadtaghitaghavifard riskofbetaevidencefromprospecttheory |