Abstract: This paper discusses the reaction of investors in the Taiwan stock market to the most probable unknown earnings-related information and the most probable known earnings-related information. As compared with the previous literature regarding the effect of an official announcement of earnings forecast revision, this paper further analyzes investors’ cognitive bias toward the unknown and known earnings-related information, and the role of media during the investors' reactions to the foresaid information shocks. The empirical results show that both the unknown and known earnings-related information provides useful information content for a stock market. In addition, cognitive bias and disposition effect are the behavioral pitfalls that commonly occur in the process of the investors' reactions to the earnings-related information. Finally, media coverage has a remarkable influence upon the investors' trading decisions.
Abstract: Comparing with prior studies mainly focused on the
effect of a certain event (it may be the initial announcement of bad
news or the repeated announcements of identical bad news) on stock
price, the aim of this study is to explore how investors react to
subsequent bad news with identical content. Empirical results show
that as a result of behavioral pitfalls, investors underreact to the initial
announcement of the bad news (i.e., unknown bad news) and overreact
to the repeated announcements of the identical bad news (i.e., known
bad news).
Abstract: This study investigates the investors- behavioral
reaction to the investment rating change announcements from the
views of behavioral finance. The empirical results indicate that
self-interest does affect the intention of securities firms to release
investment ratings for individual stocks. In addition, behavioral
pitfalls are also found in the response of retail investors to investment
rating change announcements.