Prior Consequences and Subsequent Risk Taking: New Field Evidence from the Taiwan Futures Exchange

• 成果类型: Article
• 署名作者: Liu, Yu-Jane; Tsai, Chih-Ling; Wang, Ming-Chun; Zhu, Ning
• 署名单位: Peking University; University of California System; University of California Davis; National Kaohsiung University of Science & Technology
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.1090.1131
• 发表日期: 2010
• 页码: 606-620
• 关键词: dynamic prospect theory; risk taking; Market makers; options markets

摘要

We use a data set from market participants in the Taiwan Stock Exchange Capitalization Weighted Stock Index options markets to demonstrate a strong positive relationship between prior trading outcomes and subsequent risk taking. In particular, investors in this market take above-average risks in afternoon trading after morning gains. The phenomenon is prevalent in all three types of market makers' accounts and across different types of market participants. Our findings are consistent with the argument that prior outcomes affect subsequent risk taking through a relationship that is sensitive to the model parameters (i.e., expected return, trading period, and curvature of the value function), because prospect theory can predict both increased and decreased levels of subsequent risk taking. We provide possible explanations behind the phenomenon and discuss reasons for the variety of findings in the existing literature.