Investors Cognitive biases Effect on Stock Valuation

Subject Areas : Financial Knowledge of Securities Analysis

هاشم نیکومرام ¹ , فریدون رهنمای رودپشتی ² , فرشاد هیبتی ³ , شهره یزدانی ⁴

1 - مسئول مکاتبات
2 - ندارد
3 - ندارد
4 - ندارد

Received: 2011-01-08 Accepted : 2011-04-04 Published : 2012-06-09

Keywords: cognitive psychology, Overreaction, Under Reaction, Cognitive bias, representation, over confidence, Financial Behavioral,

Abstract :

From 1980, when behavioral Faineance was raised, rationality of investors andstock exchange efficiency were criticized. The behavioral finance literature assumesthat investors are subject to behavioral biases and overreact or under react toinformation received that results in stock misevaluation.In this paper stock misevaluation is measured following Rodes-Kropf et.al.(2005)and based on financial information of individual firms and industries .This model presents a new measure of examining misevaluation and predictingfuture stock return.After examining the models in Tehran Stock Exchange (TSE), we constructportfolios on Misv and then investigate investors reaction to the information trends.The results show that there are overreaction and under reaction in TSE affected byRepresentativeness bias and overconfidence and MISV is related with firm size, B/Mratio, liquidity rate, firm age, past stock price and return and EPS