Investigating the impact of stock valuation errors and overreaction in the market on investment decisions: the role of transparency and information shock
Subject Areas : Investments
Nazanin Yadegari
1
,
Ali Lalbar
2
*
,
Hasan Abedi
3
1 - Department of Financial Management, Ar.C, Islamic Azad University, Arak, Iran.
2 - Department of Accounting, Ar.C., Islamic Azad University, Arak, Iran.
3 - Department of Accounting, Ar.C, Islamic Azad University, Arak, Iran.
Keywords: Extreme Reaction, Information Shock, Information Transparency, Investment Decisions, Stock Valuation Errors,
Abstract :
Purpose: This study investigates the impact of stock mispricing and market overreaction on investment decisions, with a particular focus on the roles of information transparency and information shocks.
Research Methodology: This applied research was conducted using a descriptive–correlational design. The statistical population consisted of firms listed on the Tehran Stock Exchange from 2014 to 2021, and 125 firms were selected using systematic elimination. Data were collected through documentary review and analyzed using the EViews software and multiple regression tests.
Findings: The results indicate that stock mispricing and market overreaction have a significant impact on investment decisions. This effect varies depending on the degree of information transparency and the severity of information shocks. These findings are consistent with the related theoretical literature and confirm the influence of psychological factors and cognitive biases on investors' decisions.
Originality / Value: This study demonstrates that investors’ behavior is not always aligned with traditional economic theories. Analyzing such behavioral patterns can provide valuable insights for financial and economic policymakers, enabling them to implement strategies that encourage investment and support individual investment objectives.
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