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There are many investment ways such as bank depositing, enterprise business, and stock investment. Bank depositing is a safe and easy way to invest and hence, it is known as reference tool to compare or make decision on other investment methods. Alternately, stock investment is preferred method with good feeling about its preeminence. However, according to mathematical model, stock investment and bank depositing have the same benefit if their growth rate and interest rate are the same. Therefore, I propose a so-called jagged stock investment (JSI) strategy in which the chain of buying stock in the given time interval is modeled as a saw with expectation that JSI strategy gets frequently profitable.

The well-documented nonparticipation in the stock market by many households and the highly negative correlation between stock and housing investment are puzzling. We show that stock and housing markets are cointegrated, and thus households significantly increase housing expenditure, reduce stock investment, and may choose nonparticipation in the stock market at all if they face short-sale constraints. Our model can thus potentially help explain both the puzzle of stock market nonparticipation and the puzzle of the highly negative correlation between stock and housing investment. We also show some empirical evidence that is supportive of the model's main implications.

Individuals’ stock market participation depends on the risk–return trade-off they expect to achieve from investing. We argue that the expected economic benefits from investing are highly heterogeneous. To capture these benefits, we define the personal equity risk premium (PERP) as the difference between an individual’s expected stock return and personal opportunity cost of capital. We find that the PERP is a significant determinant of stock market participation. Our results hold after we control for known factors, such as financial literacy, trust, and loss aversion. The results are stronger when we analyze the level of stock investment. Disentangling the PERP into its two components shows that both contribute to explain both stock market participation and the level of participation.

Korean Abstract: 투자의사결정에서 주가의 예측은 매우 중요한 역할을 한다. 일반적으로 투자자는 주가를 예측할 때 주식의 미래가격을 예측하기도 하고 그 주식의 수익률을 예측하기도 하는데 해외 선행연구에서는 이에 따라 그 예측값이 달라지는 프레이밍 효과를 확인하였다(Galser et al., 2007). 본 연구는 Glaser et al.(2007)의 연구 방법을 원용하여, 국내 주식투자자에게서도 주식시장을 예측할 때 가격 예측과 수익률 예측에 따라 결과에 차이가 나는 프레이밍 효과가 있는지를 실증 분석하고자 하였다. 또한 예측에 참고하는 과거 주가정보 제시 기간과 미래의 예측 시점에 따라서도 예측 결과가 다르게 나타나는지를 살펴보았다. 이를 위하여 주식투자 경험이 있는 30~50대 투자자 276명을 대상으로 하락, 보합, 상승세의 종목에 대한 정보를 제시하고 각 종목에 대하여 1개월 및 6개월 이후의 가격 또는 수익률을 예측하도록 하였다. 분석결과 투자자들은 주식시장을 예측할 때 가격으로 예측하는 것보다 수익률로 예측할 때 더 긍정적으로 예측한다는 것을 알 수 있었다. 또한 긴 기간(3년)의 과거 주가정보를 제공받은 경우보다 짧은 기간(6개월)의 과거 주가정보를 제공받은 경우에 더 긍정적으로 예측하며, 가까운 미래(1개월 후)를 예측할 때보다 먼 미래(6개월 후)를 예측할 때 더 긍정적으로 예측한다는 것을 확인하였다. 지금까지 주식가격 예측에 대한 프레이밍 효과를 살펴본 국내 연구가 없는 상황에서 본 연구의 결과는 주식투자자 심리에 대한 이해의 폭을 넓히는 데에 기여할 수 있을 것으로 보인다. English Abstract: The goal of investors entering the stock market is to gain a higher return than current market return rate, and they are required to forecast the fluctuations of stock prices in the future. When forecasting the fluctuations of the stock values, either the stock prices or return rates can be forecasted. Previous studies conducted abroad have proven the framing effect that changes the forecasted value according to the method of asking questions, even for the same stocks. This study applied the methodology reported by Glaser et al. (2007) to substantially analyze the framing effect of the forecast to discuss whether the results of the forecast vary according to the forecast of stock prices and the forecast of the return rate for stock investors in Korea. This study also examined whether the results vary according to the period of the past stock value information referenced and the future point of prediction. The price and return rate framing effects were examined through an online survey with 276 stock market investors in their 30s to 50s. As a result, the use of the return rate rather than the stock prices provides a more positive forecast of the stock market. In addition, the forecast is more positive when the period of past information is shorter (6 months), not longer (3 years), and when predicting far into the future (6 months) rather than the near future (1 month later). No study has discussed the framing effect of a stock price forecast. Therefore, the findings of this study will help better understand the psychology of stock investors.

The geopolitical risk found to be a relevant factor for investors to choose Islamic stock investment. This study focuses on the short-run and long-run asymmetric significance of geopolitical risk on Islamic stock market returns. Nonlinear Autoregressive Distributive Lag (NARDL) model has been used for the major Islamic countries i.e. Saudi Arabia, Malaysia, Turkey, and Indonesia. The short-run dynamics suggest the presence of short-run asymmetry in the case of Saudi Arabia and Indonesia. However, in the long-run, the positive and negative shock of geopolitical risk is having an asymmetric impact on the Islamic stock market return in the case of Indonesia. The Islamic stock market getting an asymmetric response to geopolitical shock can be because of multiple determinants related to the Islamic stock market and different environments of the Islamic stock market in each economy. The study recommends the Islamic investors and other participants to consider the asymmetric nature of Islamic stock market returns to minimize risk related to negative geopolitical events.

We use data on Indian stock portfolios to show that return heterogeneity is the primary contributor to increasing inequality of wealth held in risky assets by Indian individual investors. Return heterogeneity increases equity wealth inequality through two main channels, both of which are related to the prevalence of undiversified accounts that own relatively few stocks. First, some undiversified portfolios randomly do well, while others randomly do poorly. Second, larger accounts diversify more effectively and thereby earn higher average log returns even though their average simple returns are no higher than those of smaller accounts.

Claims that the stock market is an investment for the long term are common, details on how long it takes less so, and empirical justifications are downright rare. In order to avoid losing purchasing power on one’s stock investment, it must last two decades (with regular investments, it takes around half a dozen more years). The uncertainty of returns decreases for stock investments up to three to three and a half decades, before hitting a 15-year long plateau. Reaching three decades thus reduces the part played by chance (when one happens to be born), but waiting for five decades shows less further improvement.

I study optimal consumption and investment for retirement in an economic environment where an individual has retirement flexibility and borrowing constraints. I show that Friedman’s (1957) permanent income hypothesis (PIH) is generalized with retirement and constrained borrowing against future labor income. In particular, a linear consumption rule in financial wealth and human wealth does not hold, and the non-linearity feature of option associated with retirement is of great importance to the consumption policy. Further, the first-order effect of inability to borrow money with human wealth on consumption and savings for retirement is captured by the generalized PIH rule. Finally, I find that an individual’s aggressive risk taking by increasing stock investment turns out to be somewhat rational for retirement.

This paper studies the importance of stock market literacy and trust for stock ownership decisions. We find that these two distinct channels simultaneously explain not only the probability of participation, but, conditional on participation, also explain the share of investment in stocks. Once we account for stock market literacy, sociability is no longer significant for participation; what matters is literacy rather than sociability. Further, we observe that economic shocks and future expectations are key behavioral characteristics that explain a household's decision to invest in stocks. However, upon participation, a larger set of behavioral characteristics explains the level of stock investment.

The purpose of this research is to investigate the impact of cognitive style to recency effect in stock investment. This study expands Alvia and Sulistiawan (2010) work. Using cognitive style as moderating variable, the study explains the impact of type and order of information to recency bias when the information sequentially presented. This research uses unbalance ANOVA to examine the bias in stock investment decision making through laboratory experimental study. The participants are 172 bachelor degree students in accounting. They represent nonprofessional investor in stock market. The separation of treatment and control group is based on simple training about technical analysis knowledge. Control group did not received training about technical analysis knowledge. The results show that cognitive style enhances the impact of type and order of information to recency bias.

This book review discusses the bible of fundamental analysis and value investing drafted by the mentor of Mr. Warren Buffett, current world greatest investor.

This paper is the book review of one of the oldest books about stock investment and earliest exchange in Netherland: Confusion de Confusions.

This study aims to compare between maximum losses that could be arising to sharia based stock and non-sharia based stock investment due to the differences characteristic of these stocks. As the consequence of Conditional Variance Phenomenon, this study will use EWMA model and GARCH model. The finding show that EWMA model provides better performance and gives more conservative of VAR value than GARCH model. It is also shown that Sharia based stock is riskier during February to March and May to July. Finally, this study tries to give information on risk characteristic in Indonesia’s Capital Market.

Despite the suggestion made by investment banks and brokerage firms for private investors to substitute one or all part of their stock investment by the associated option, the real benefit obtained from dealing with an option rather than with its underlying stock remains to be understood. Using our general results (in Theorems 1 and 4), market and synthetic data on option prices, it appears that for many situations investing in an option may be less interesting than investing directly in the related underlying stock. However there is no definitive answer about the superiority or not of investing in the option, since the situation depends on the level of asset change at the investment maturity. Our contribution here to the above question is to provide a systematic analysis of the return structures associated with the two alternative investments. Then, it is up to the investor to decide the best investment support to choose depending on her views on the future asset relative change and on the option characteristics which are available on the markets. The fomulas we derive here may be helping in performing this task.

Earlier behavioral finance research has found that individual investors’ familiarity with companies’ products may spill over to affect their decisions to invest in the companies’ stocks. However, what has not been confirmed is whether also subjective product evaluations spill over to affect investment decisions. To examine this question, the authors utilize a randomized experiment, conducted with Finnish individual investors. The experiment reveals that an individual investor’s subjective evaluation of a company’s products has positive effect on his interest to invest in the company’s stock; that this effect is independent of familiarity; and that the effect may be especially reinforced for non-domestic companies.

Using surveys, on-site interviews of approximately 225 publicly-traded pharmaceutical firms in the United States, and a matching dataset with 42,849 observations of pharmaceutical patent citations, we combine both quantitative and qualitative research methods to investigate the relations between geographic proximity to innovation resources and stock returns. We develop a geographic innovation index to capture the key geographic factors that might have a positive impact on the firm's knowledge creation. We then examine the stock investment performance in terms of risk-adjusted returns for companies that have greater proximity to geographic innovation resources versus those companies that have less proximity to geographic innovation resources. We find that investments in companies with greater proximity to geographic innovation resources tend to achieve better risk-adjusted returns in the stock markets.

This study examines whether the framing mode (narrow versus broad) influences the stock investment decisions of individual investors. Motivated by the experimental evidence, which suggests that separate decisions are more likely to be narrowly framed than simultaneous decisions, we propose trade clustering as a proxy for narrow framing. Using this framing proxy, we show that investors who execute more clustered trades exhibit weaker disposition effects and hold better-diversified portfolios. We also find that the degree of trade clustering is related to investors' stock preferences and portfolio returns. Collectively, the evidence indicates that the choice of decision frames is likely to be an important determinant of investment decisions.

It is an investment portfolio composed of four different stocks, which two are picked from U.S.-Based MNCs and the other two are from Foreign Stocks (ADRs). The amount invested in each stock is $10.000.A forming portfolio of $40.000 is monitored, evaluated and, estimated on an approximate period of three months (February 28th-May 18th, 2007) for any possible average percentage change in the stocks’ prices. Reasons on that are well supported by analyzing different tables, charts and, stating related news.

Investors in 401(k) plans violate basic principles of diversification by holding a significant fraction of their savings in the form of their employers' equity. This paper characterizes investors' active changes to their company stock investment over time by analyzing new inflows and transfers. Investors seem to base active changes on salient information, paying attention to past returns, volatility, and business performance. Past returns, over a three-year horizon, predict higher inflow allocations and transfers, whereas volatility and business performance only have a weak effect. The sensitivity to past returns is asymmetric, with investors reacting more strongly to positive and above - S&P500 returns.