The Perception of Dependence, Investment Decisions, and Stock Prices

• 成果类型: Article
• 署名作者: Ungeheuer, Michael; Weber, Martin
• 署名单位: Aalto University; University of Mannheim; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12993
• 发表日期: 2021
• 页码: 797-844
• 关键词: cross-section; separation theorem; prospect-theory; RISK; returns; equilibrium; tests; literacy; MARKETS; neglect

摘要

How do investors perceive dependence between stock returns; and how does their perception of dependence affect investments and stock prices? We show experimentally that investors understand differences in dependence, but not in terms of correlation. Participants invest as if applying a simple counting heuristic for the frequency of comovement. They diversify more when the frequency of comovement is lower even if correlation is higher due to dependence in the tails. Building on our experimental findings, we empirically analyze U.S. stock returns. We identify a robust return premium for stocks with high frequencies of comovement with the market return.