The behavior of Malaysian stock market investors: a prospect theory perspective
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Date
2005-05
Authors
Nurliyana Thoh Binti Abdullah
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Abstract
This research comes from a behavioral viewpoint on corporate finance and tries to explain the behavior of investors from a psychological approach, specifically by using prospect theory. The behavior of investors is captured through trading volume and the reaction is based on earnings surprise during earnings announcements. It is hypothesized that trading volume and earnings surprise is positively correlated, thus, predicting that investors would trade more during positive earnings surprises compared to negative earnings surprises. The sample of this study is 109 companies from the main board of Bursa Malaysia over a period of six quarterly earnings announcements. The results indicate that this behavior is not exhibited by investors and that this relationship is not influenced by firm size either. Nevertheless, a regression model on trading volume indicates that investors are more concerned with stock price and firm size rather than earnings surprise when they trade during earnings announcements.
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Keywords
Business Administration , Stock Market Investors