Mental time travel and the valuation of financial investments: analysing five biases that cause pricing anomalies

IF 1.9 Q2 BUSINESS, FINANCE
David Blake, John Pickles
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引用次数: 0

Abstract

Purpose

The purpose of this paper is to analyse five biases in the valuation of financial investments using a mental time travel framework involving thought investments – with no objective time passing.

Design/methodology/approach

An investment’s initial value, together with any periodic funding cash-flows, are mentally projected forward (at an expected rate of return) to give the value at the investment horizon; and this projected value is mentally discounted back to the present. If there is a difference between the initial and present values, then this can imply a bias in valuation.

Findings

The study identifies (and gives examples of) five real-world valuation biases: biased funding cash-flow estimates (e.g., mega infrastructure projects); biased rate of return projections (e.g., market crises, tech stock carve-outs); biased discount rate estimates (e.g., dual-listed shares, dual-class shares, short-termism, time-risk misperception, and long-termism); time-duration misestimation or perception bias when projecting (e.g., time-contracted projections which lead to short-termism); and time-duration misestimation or perception bias when discounting (e.g., time-extended discounting which also leads to short-termism). More than one bias can be operating at the same time and we give an example of low levels of retirement savings being the result of the biased discounting of biased projections. Finally, we consider the effects of the different biases of different agents operating simultaneously.

Originality/value

The paper examines key systematic misestimation and psychological biases underlying financial investment valuation pricing anomalies.

心理时空旅行与金融投资估值:分析导致定价异常的五种偏差
设计/方法/途径一项投资的初始价值以及任何周期性的资金现金流,都要在头脑中向前推算(按预期收益率),以得出投资期限内的价值;然后将推算出的价值在头脑中折算回现在的价值。如果初始值与现值之间存在差异,则可能意味着估值存在偏差。研究结果本研究确定了(并举例说明了)现实世界中的五种估值偏差:偏差的资金现金流估算(如大型基础设施项目);偏差的回报率预测(如市场危机、科技股分割);偏差的贴现率估算(如双重上市股票、双类股票);偏差的投资回报率预测(如投资回报率预测);偏差的投资回报率预测(如投资回报率预测);偏差的投资回报率预测(如投资回报率预测);偏差的投资回报率预测(如投资回报率预测)、双上市股票、双类股票、短期主义、时间风险错误认知和长期主义);预测时的时间长度错误估计或认知偏差(如导致短期主义的时间收缩预测);以及贴现时的时间长度错误估计或认知偏差(如同样导致短期主义的时间延长贴现)。我们举例说明,低水平的退休储蓄就是对偏差预测进行偏差贴现的结果。最后,我们考虑了不同代理人的不同偏差同时作用的影响。
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来源期刊
Review of Behavioral Finance
Review of Behavioral Finance BUSINESS, FINANCE-
CiteScore
4.70
自引率
5.00%
发文量
44
期刊介绍: Review of Behavioral Finance publishes high quality original peer-reviewed articles in the area of behavioural finance. The RBF focus is on Behavioural Finance but with a very broad lens looking at how the behavioural attributes of the decision makers influence the financial structure of a company, investors’ portfolios, and the functioning of financial markets. High quality empirical, experimental and/or theoretical research articles as well as well executed literature review articles are considered for publication in the journal.
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