Past-oriented behavioral bias: A study on S&P & TEPIX index-es

Subject Areas : Financial Econometrics

Mohsen  Mehrara ¹ (Faculty of Economics, University of Tehran, Tehran, Iran)
Saeid  Tajdini ² (Faculty of Economics, University of Tehran, Tehran, Iran)
Jamal  Maghsoudi ³ (Faculty of management, University of Tehran, Tehran, Iran)
Majid  Lotfi Ghahroud ⁴ (Faculty of management, University of Tehran, Tehran, Iran)
Niloufar  Ebrahimiyan ⁵ (Faculty of social sciences and economics, Alzahra University, Tehran, Iran)
Farzad  Jafari ⁶ (Faculty of management, University of Tehran, Tehran, Iran)

Received: 2021-05-09 Accepted : 2021-09-25 Published : 2022-01-01

Keywords: random walk theory, past-oriented behavioral bias, Behavioral Finance,

Abstract :

Behavioral finance had been becoming a fast-growing field of study in the past few years and because of the importance of investors' behavior in market performance, it's extremely noteworthy. By studying biases from their orientation perspective, we can divide them into two major groups, past-oriented, and current-oriented biases. In this research, a model had been developed for the past-oriented behavioral bias, which is closely related to the random walk theory. The research sample included the daily price information of 9 different industry indices in the Tehran Exchange Price Index (TEPIX), the index of 50 Top Companies in the Tehran Stock Exchange, and the S&P index in the New York Stock Exchange from 03/25/2011 to 03/19/2019. The results of the ARIMA model based on Markov switching models were measured for the degree of rigidity of these indexes by random walk theory, and then the effect of past-oriented behavioral bias was calculated in each of these 12 indexes by developing a new model. The results indicate that the cement index had the highest past-oriented behavioral bias (57%), followed by the top 50 companies index (46%), chemicals (41%), and oil product index (12%). However, the S&P index had no past-oriented behavioral bias.

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