How the shift to quality Distinguished winners from losers during the financial crisis
Document Type
Article
Publication Date
11-6-2012
Subject Area
ARRAY(0x55a3ff7f85a8)
Abstract
We examine winner and loser portfolios as a result of the financial crisis from 2007 to 2008 to determine the ex-ante characteristics of winner and loser stocks. The best performing decile actually gained more than 27% in our sample of 2,267 firms while the worst performing decile lost nearly 90% of its value. We show that investor sentiment shifted away from risky stocks, but risk aversion went beyond an avoidance of market and intrinsic risk. Smaller, value stocks with high-leverage significantly underperformed the market while investors shifted to larger, glamour stocks with high dividend yields. Our results provide strong support for the theories of projection bias, risk aversion and regret avoidance. © The Institute of Behavioral Finance.
Publication Title
Journal of Behavioral Finance
Volume
13
Issue
2
First Page
81
Last Page
92
Digital Object Identifier (DOI)
10.1080/15427560.2012.657506
ISSN
15427560
E-ISSN
15427579
Citation Information
Davis, & Madura, J. (2012). How the Shift to Quality Distinguished Winners from Losers During the Financial Crisis. The Journal of Behavioral Finance, 13(2), 81–92. https://doi.org/10.1080/15427560.2012.657506