The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
AFA members can log in to view full-text articles below.
View past issues
Search the Journal of Finance:
Search results: 3.
The Impact of Salience on Investor Behavior: Evidence from a Natural Experiment
Published: 10/21/2019 | DOI: 10.1111/jofi.12851
CARY FRYDMAN, BAOLIAN WANG
We test whether the display of information causally affects investor behavior in a high‐stakes trading environment. Using investor‐level brokerage data from China and a natural experiment, we estimate the impact of a shock that increased the salience of a stock's purchase price but did not change the investor's information set. We employ a difference‐in‐differences approach and find that the salience shock causally increased the disposition effect by 17%. We use microdata to document substantial heterogeneity across investors in the treatment effect. A previously documented trading pattern, the “rank effect,” explains heterogeneity in the change in the disposition effect.
Insensitive Investors
Published: 06/18/2024 | DOI: 10.1111/jofi.13362
CONSTANTIN CHARLES, CARY FRYDMAN, METE KILIC
We experimentally study the transmission of subjective expectations into actions. Subjects in our experiment report valuations that are far too insensitive to their expectations, relative to the prediction from a frictionless model. We propose that the insensitivity is driven by a noisy cognitive process that prevents subjects from precisely computing asset valuations. The empirical link between subjective expectations and actions becomes stronger as subjective expectations approach rational expectations. Our results highlight the importance of incorporating weak transmission into belief‐based asset pricing models. Finally, we discuss how cognitive noise can provide a microfoundation for inelastic demand in the stock market.
Using Neural Data to Test a Theory of Investor Behavior: An Application to Realization Utility
Published: 11/18/2013 | DOI: 10.1111/jofi.12126
CARY FRYDMAN, NICHOLAS BARBERIS, COLIN CAMERER, PETER BOSSAERTS, ANTONIO RANGEL
We conduct a study in which subjects trade stocks in an experimental market while we measure their brain activity using functional magnetic resonance imaging. All of the subjects trade in a suboptimal way. We use the neural data to test a “realization utility” explanation for their behavior. We find that activity in two areas of the brain that are important for economic decision‐making exhibit activity consistent with the predictions of realization utility. These results provide support for the realization utility model. More generally, they demonstrate that neural data can be helpful in testing models of investor behavior.