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How do US and Japanese investors process information, and how do they form their expectations of the future? Evidence from quantitative survey based data

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  • Patricia Fraser

    (Accountancy and Finance, University of Aberdeen Business School, Edward Wright Building)

Abstract

Contemporaneous survey data on the expectations of US and Japanese investors on the DJIA and the Nikkei are used to compute direct tests of investor rationality and efficiency and to provide evidence on the type of mechanism which best characterises expectation evolution. Over the period 1989–99, investors appear as biased and inefficient processors of information with the nature of the bias related to the index and its underlying fundamentals rather than the investor base. Investor expectations appear to be formed adaptively as a time-varying, weighted function of past forecast errors.

Suggested Citation

  • Patricia Fraser, 2004. "How do US and Japanese investors process information, and how do they form their expectations of the future? Evidence from quantitative survey based data," Journal of Asset Management, Palgrave Macmillan, vol. 5(2), pages 77-90, August.
    • Handle: RePEc:pal:assmgt:v:5:y:2004:i:2:d:10.1057_palgrave.jam.2240130
    DOI: 10.1057/palgrave.jam.2240130
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    Cited by:

    1. Les Coleman & Krishnan Maheswaran & Sean Pinder, 2010. "Narratives in managers’ corporate finance decisions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(3), pages 605-633, September.
    2. Les Coleman & Sean Pinder, 2010. "What were they thinking? Reports from interviews with senior finance executives in the lead-up to the GFC," Applied Financial Economics, Taylor & Francis Journals, vol. 20(1-2), pages 7-14.
    3. Markku Kaustia & Eeva Alho & Vesa Puttonen, 2008. "How Much Does Expertise Reduce Behavioral Biases? The Case of Anchoring Effects in Stock Return Estimates," Financial Management, Financial Management Association International, vol. 37(3), pages 391-412, September.
    4. Silvija Vlah Jerić & Mihovil Anđelinović, 2019. "Evaluating Croatian stock index forecasts," Empirical Economics, Springer, vol. 56(4), pages 1325-1339, April.

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