Investor propensity to speculate and price delay in emerging markets

Chin Wen Hsin; Shu Cing Peng

doi:10.1016/j.irfa.2023.102557

Investor propensity to speculate and price delay in emerging markets

Chin Wen Hsin, Shu Cing Peng

Department of Finance

Research output: Contribution to journal › Article › peer-review

2 Scopus citations

Abstract

Stocks with lottery-type payoffs exhibit more pronounced price delay. This finding holds for emerging market stocks even when jointly considering the impact of IVOL. In a cross-market analysis, a stronger market-level propensity to speculate, gauging the strength of investor preference for lottery-type payoffs, is found to delay the price reaction to information for stocks in the market in general. These conclusions remain robust when using a random sample that mitigates the bias from unevenly distributed sample observations across markets. Our findings add to the evidence that investors' asset choices that deviate from ideal portfolio diversification influence the process of stock pricing.

Original language	English
Article number	102557
Journal	International Review of Financial Analysis
Volume	86
DOIs	https://doi.org/10.1016/j.irfa.2023.102557
State	Published - Mar 2023

Keywords

Emerging market
Idiosyncratic volatility
Information diffusion
Lottery-type stocks
Price delay

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10.1016/j.irfa.2023.102557

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title = "Investor propensity to speculate and price delay in emerging markets",

abstract = "Stocks with lottery-type payoffs exhibit more pronounced price delay. This finding holds for emerging market stocks even when jointly considering the impact of IVOL. In a cross-market analysis, a stronger market-level propensity to speculate, gauging the strength of investor preference for lottery-type payoffs, is found to delay the price reaction to information for stocks in the market in general. These conclusions remain robust when using a random sample that mitigates the bias from unevenly distributed sample observations across markets. Our findings add to the evidence that investors' asset choices that deviate from ideal portfolio diversification influence the process of stock pricing.",

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AB - Stocks with lottery-type payoffs exhibit more pronounced price delay. This finding holds for emerging market stocks even when jointly considering the impact of IVOL. In a cross-market analysis, a stronger market-level propensity to speculate, gauging the strength of investor preference for lottery-type payoffs, is found to delay the price reaction to information for stocks in the market in general. These conclusions remain robust when using a random sample that mitigates the bias from unevenly distributed sample observations across markets. Our findings add to the evidence that investors' asset choices that deviate from ideal portfolio diversification influence the process of stock pricing.

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Investor propensity to speculate and price delay in emerging markets

Abstract

Keywords

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