Diss. Stockholm : Handelshögsk.

In Essay 1, I use cross-country differences in investors’ traits — trust, patience, overconfidence, and risk tolerance — to test the underreaction, overreaction, and uncertain information theories of stock returns. I find that investors’ reactions to large daily stock price shocks vary between lower and higher levels of these traits. Specifically, investors with lower levels of trust and more patience underreact more (or overreact less) to price shocks, which aligns with the predictions of the underreaction hypothesis. Investors with higher levels of overconfidence overreact more to positive price shocks and overreact less to negative price shocks. While this finding does not conform exactly to the predictions of the overreaction hypothesis, it is consistent with more refined theories of how overconfidence affects asset prices. Investors less tolerant of risk overreact less to positive price shocks. I also find that differences in institutional characteristics affect over/underreaction. Specifically, there is less overreaction in countries with stronger investor protections and less insider trading. Additionally, the ability to sell short is associated with more overreaction to negative shocks and less overreaction to positive shocks. In Essay 2, I investigate whether publicly available information (PAI) affects over/underreaction according to predictions of several theoretical models, and then I test if differences in investors’ traits modifies the association between publicly available information and returns. After identifying and correcting for a methodological issue in some prior research, I show that in a pooled international sample of stocks, investors overreact to price shocks not accompanied by information, and also overreact (or react efficiently in some models) to information-based price shocks. I find that the effect of PAI on returns is not the same in each country, which motivates my tests on how this variability relates to differences in investor traits. My results show that investors with higher trust tend to overreact less to shocks accompanied by PAI, while investors less tolerant of risk underreact to positive price shocks. Additionally, investors with higher overconfidence and self-attribution bias overreact more to positive price shocks, but less to negative price shocks, in accordance with behavioral theories. / Includes bibliography. / Dissertation (Ph.D.)--Florida Atlantic University, 2018. / FAU Electronic Theses and Dissertations Collection

The system used for the taxing of dividends in South Africa (SA) has been subject to constant reform over the past two decades. The stated objective for each reformation process has remained constant since 1986, which is to align SA with international tax norms and to encourage investment into the SA economy. In the 2007 budget, the Minister of Finance announced that the new dividends tax legislation would replace the Secondary Tax on Companies (STC) legislation. STC was considered to be a complex tax system, which was only used by SA and a handful of other countries. Therefore it was difficult for foreign investors to understand the technical aspects of STC. These complexities deterred foreign investors from investing in South Africa. Dividends tax, on the other hand, is a withholding tax which is levied at a shareholder level. It is easily understood and internationally recognised. The South African Government indicated that the objective for the introduction and implementation of dividends tax in SA was to make SA a more attractive investment destination by aligning the South African system used for the taxing of dividends with internationally recognised systems. The purpose of this study is to determine whether or not there are any tax incentives or benefits included in the dividends tax legislation which will encourage foreign investors to consider SA as a potential investment destination. The study is based on an extensive literature review, the exploration of STC and dividends tax legislation and also incorporate the views of previous academic research performed on this subject. This study has established that foreign investors will benefit from the implementation of dividends tax in SA. The benefits for foreign investors are not necessarily embedded in the dividends tax legislation, but there are still benefits that can be enjoyed from applying this type of system for the taxing of dividends declared and distributed. The objective for the implementation of dividends tax was to align SA with international tax norms and to encourage investment in SA. This study has revealed that the introduction of dividends tax has achieved this objective. It further established that the legislation is not particularly partial towards one type of shareholder or investor but rather that dividends tax strives to increase investment opportunities in order to stimulate growth in SA. / Dissertation (MCom)--University of Pretoria, 2013. / lmchunu2014 / Taxation / unrestricted

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In this thesis a detailed examination is carried out into the role and impact of the volume of trade in UK futures markets. While the success of a market may be judged by the number of investors that it attracts, how does the behaviour of individuals influence such key variables as price volatility and the cost of trading? The empirical work carried out here allows a unique appreciation of issues that have important implications for policy makers, investors and the practitioner. Motivated by a desire to understand whether volatility is destabilising or a reflection of fundamental factors, as well as the nature of the distribution of price returns, the relationship between volume and price movements is investigated in detail. The preliminary analysis suggests an important role for the flow of information which is confirmed by the rigorous testing of Anderson's (1996) specification of the Mixture of Distributions Hypothesis. The exploitation of this model allows an in-depth analysis of the information process including the identification of the informed and uninformed components of volume. There is also an investigation into the possibility that the volume statistic itself has an informative value. Using the Blume et al. (1994) approach the results suggest that, for a variety of futures contracts, the markets show a high degree of information dispersion. The need to attract investors has never been more acute than in today's competitive financial environment. It is therefore important to obtain a good appreciation of the relationship between volume and the cost of trading. This thesis includes a comprehensive intra-day study of the relation within a simultaneous econometric framework that exploits state-space models to investigate how markets react to unexpected levels of trading. The results question the dominance of inventory cost models and suggest that patterns of trade have become more predictable since contract inception, despite increases in volume.

I examine the determinants and implications of false news on client business risk and firm credibility. False news is defined as information presented as factually accurate, but which contains fabricated facts and is deliberately made public to mislead the reader. Importantly, it is later denied by a credible source. There is a significant concern about the influence of false news on individuals’ decision-making and judgment processes. However, our knowledge regarding false news and its implications for financial markets is minimal. I investigate false news by focusing on negative false news that is not initiated from within the company. Building on financial and political motives behind incidents of false news, I examine whether industry competition and media coverage play a role in making a firm a target for false news. I further examine the impact of false news on the firm’s financial reporting behavior and investigate whether the firm’s auditor prices false news. Lastly, based on the argument that false news increases distrust and uncertainty, I examine whether false news decreases the credibility of the firm’s disclosures and test whether the earnings response coefficient (ERC) is lower after the release of false news. I find that lower competition and higher media coverage are associated with higher likelihood of false news. Consistent with my predictions, I also find that false news target firms have higher abnormal accruals, higher abnormal real earnings activities, and higher audit fees. However, I do not find support for the notion that false news reduces credibility of firm’s disclosure. / Includes bibliography. / Dissertation (Ph.D.)--Florida Atlantic University, 2019. / FAU Electronic Theses and Dissertations Collection

Crowdfunding describes the emerging phenomenon of raising financing from a large audience via the Internet. The purpose of this thesis is to describe what factors influence individuals to invest in crowdfunding projects and to test their explanatory strength of how much someone invests. A conceptual framework is developed and a study of 735 individuals was conducted on three international crowdfunding platforms. The findings show that trust is important and that the individuals are mainly driven by willingness to help, to support a good cause and to be part of a project realization. The study also shows that some of the factors have a significant relationship to the investment size; however, these factors can only explain a small part of the investments. The thesis provides some tentative insights and implications on how to successfully raise financing through crowdfunding and takes a further step towards explaining this new phenomenon.

Using detailed data of individual investors, this dissertation investigates whether and how individuals use financial disclosure and analysts’ signals. Chapter 1 shows that, on average, individuals invest more in firms with readable, concise, and transparent financial disclosures. The results indicate that these relations are less pronounced for overconfident investors, and that individual investors appear to place a greater weighting on such financial disclosure attributes relative to institutional investors. In supplementary analyses, I further examine cross-sectional variations among individuals in their use of disclosure, and find two main subgroups that do not display a preference for accessible and transparent disclosures. The first subgroup is speculative investors, whose investment strategies rely on conjecture rather than knowledge, and the second subgroup is financially literate investors, those with lower information processing costs. These findings support the notion that more accessible and transparent disclosures are used by those individuals who need them the most: i.e., the average American. Lastly, I examine whether individuals’ investment performance varies with financial disclosure attributes and show that individuals’ returns are, on average, increasing in firms with more accessible and transparent disclosures. Chapter 2 examines how individuals react to revisions in analysts’ recommendations and earnings forecasts. First, the analyses show that individuals’ abnormal trading activity increases by 30 percent in response to analysts’ recommendation revisions and by 15 percent in response to analysts’ earnings forecast revisions. Second, the analyses indicate that 47 percent of individuals trade consistently with analyst guidance and 53 percent trade contrarian to analysts’ guidance, which opposes the belief that individuals are a homogenous group of investors. The contrarian behavior is most common in response to analyst downgrades (i.e., purchasing after downgrades) and is most evident among individuals with better prior performance, individuals who trade infrequently, men, and older individuals. Lastly, the study provides evidence suggesting that trading contrarian to analysts is in general hazardous to individuals’ financial health. Taken together, the results indicate that individuals respond to analyst guidance and that individuals’ use of analyst guidance varies significantly with respect to their personal attributes.

Using detailed data of individual investors, this dissertation investigates whether and how individuals use financial disclosure and analysts’ signals. Chapter 1 shows that, on average, individuals invest more in firms with readable, concise, and transparent financial disclosures. The results indicate that these relations are less pronounced for overconfident investors, and that individual investors appear to place a greater weighting on such financial disclosure attributes relative to institutional investors. In supplementary analyses, I further examine cross-sectional variations among individuals in their use of disclosure, and find two main subgroups that do not display a preference for accessible and transparent disclosures. The first subgroup is speculative investors, whose investment strategies rely on conjecture rather than knowledge, and the second subgroup is financially literate investors, those with lower information processing costs. These findings support the notion that more accessible and transparent disclosures are used by those individuals who need them the most: i.e., the average American. Lastly, I examine whether individuals’ investment performance varies with financial disclosure attributes and show that individuals’ returns are, on average, increasing in firms with more accessible and transparent disclosures. Chapter 2 examines how individuals react to revisions in analysts’ recommendations and earnings forecasts. First, the analyses show that individuals’ abnormal trading activity increases by 30 percent in response to analysts’ recommendation revisions and by 15 percent in response to analysts’ earnings forecast revisions. Second, the analyses indicate that 47 percent of individuals trade consistently with analyst guidance and 53 percent trade contrarian to analysts’ guidance, which opposes the belief that individuals are a homogenous group of investors. The contrarian behavior is most common in response to analyst downgrades (i.e., purchasing after downgrades) and is most evident among individuals with better prior performance, individuals who trade infrequently, men, and older individuals. Lastly, the study provides evidence suggesting that trading contrarian to analysts is in general hazardous to individuals’ financial health. Taken together, the results indicate that individuals respond to analyst guidance and that individuals’ use of analyst guidance varies significantly with respect to their personal attributes.

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