| Summary: | 碩士 === 國立宜蘭大學 === 應用經濟學系碩士班 === 100 === Abstract
The stock market in Taiwan is shallow that stock prices react dramatically when encountering certain events, such as typhoon Nari and financial crisis, which are strong enough to shock the whole industry and the national economy and livelihood in Taiwan. When some significant events occur in stock markets, the bias of investing behavior will interfere the cognition of investors about the information content of the events, which causes abnormal phenomena in stock markets, e.g. the disposition effect, selling gain stocks too soon and holding loss stocks too long. Therefore, this study takes financial tsunami as the specific event to investigate the disposition effect of stock market, and tries to figure out whether investors change the investing behavior during the financial tsunami, as well as the correlation between disposition effect and abnormal returns.
First, this study adopts event study method to detect abnormal returns in the domestic stock market during the financial crisis, and discuss the change of disposition effect, measured by disposition coefficient, through modifying the methodology offered by Weber and Camerer (1998). This study uses multiple regression models to analyze the correlation between disposition effect and abnormal returns. Moreover, variables such as financial ratios, corporate governance and disposition effect are used to explain the abnormal returns of the stock market. According to the results of this study, the financial tsunami causes abnormal returns in Taiwan’s stock market. However, before financial crisis, there are no significantly negative abnormal returns, and there are also no immediate responses to the negative signal caused by subprime mortgage in the United States, by which the under-reaction of the stock market is shown.However, after more bad news has been released, the negative information effect is getting intense that expends the negative cumulative abnormal returns. In addition, although disposition effect exists in the stock market either before or after the financial tsunami, the effect is declining continuously, and the degrees of disposition effect vary among different industries.
The results show that the variations of disposition coefficient and the abnormal returns are synchronic. When the influence of negative information is greater, e.g. the more the negative abnormal returns, the lower the disposition coefficient, the bias of investing behavior among investors is less. However, when the disposition effect declines to a certain extent, moreover, to a turning point, the negative information finally makes investors lose confidence in the stock market and causes excessive and persistent negative abnormal returns.
The difference between this study and others in the past is that this is the first one trying to discuss the correlation between abnormal returns and disposition effect, which includes the disposition effect variable in the multiple regression models to explain the abnormal returns. The results of regression analysis show that the disposition effect and the abnormal returns are significantly and positively correlated, implying that the bias of investing behavior affects the returns of stocks. Moreover, control variables such as firm size and industries also have explanatory power for the abnormal returns.
Key words: Event Study, Disposition Effect, Abnormal Returns, Corporate Governance
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