Doctor of Philosophy (PHD)
Date of Defense
First Committee Member
Second Committee Member
Third Committee Member
Fourth Committee Member
My dissertation contains three essays in behavioral finance. The first essay investigates the asset pricing implications of the strategic incentives of analysts. I find that deviations between consensus analyst optimism across forecasts and recommendations for the same firm lead to temporary price movements. For example, among firms with differences between recommendation and forecast optimism, those that are predicted to appeal most (least) to retail investors (i.e. high recommendation optimism) underperform (overperform) annually by a risk-adjusted 1.26% (2.99%). Information habitats created by strategic incentives, generate excess coordinated investor demand, and provide the mechanism for which temporary price movements occur. This habitat-based explanation helps shed light on recent puzzling findings concerning analyst opinions and their impact on market return anomalies. The second essay examines how the distribution of information affects the dynamic information gathering activities and preferences of institutional investors. Specifically, a geography-based setting is used to proxy for the information advantage of local investors and investigate if nonlocal investors use indirect information gathering methods to level the playing field. The results show that nonlocal investors use firms with more transparent information environments as lighthouses to learn about more opaque firms. These findings imply that this is one way investors can overcome geographic information frictions. The third essay investigates if the success of role models affects the portfolio decisions of U.S. households. Exploiting the election of President Obama as a pseudo natural experiment, the affect of role models on the financial decisions of minorities is examined. His political success is a positive experience for minorities that should spur optimism, mitigate perceived risks, enhance trust in the stock market, and encourage investment in financial assets by minorities. Indeed, post-2008 and compared to white Americans, minorities are more likely to increase risk tolerance, remain participating in the stock market, trade more often, invest more in risky assets, and are more willing to save. Overall, the findings suggest that social factors, like the rise of a role model, are important for portfolio decisions.
Analysts; Institutional Investors; Retail Investors; Behavioral Finance
Khalaf, Sarah, "Essays in Behavioral Finance" (2019). Open Access Dissertations. 2274.