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The High Holidays: Psychological mechanisms of honesty in real-life financial decisions

Doron Kliger and Mahmoud Qadan

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2019, vol. 78, issue C, 121-137

Abstract: Research in psychology has established that activation of religious ideas affects individuals’ behavior. We hypothesize that religious and honesty mechanisms activated on the High Holidays, the ten days before Yom Kippur, when people seek repentance, amplify people's anxiety and affect their financial decision-making. We find that returns during the High Holidays are abnormally low; implied volatility, measured by VIX and VXO, as well as realized volatility estimates, are abnormally high; and the abnormal increase in implied volatility overshoots future volatility. Using these results, we devise a simple trading rule that investors may consider to maximize returns during the High-Holidays period.

Keywords: Behavior; Beliefs; Decision-making; Honesty; Market anomalies; Mood; Religion; VIX; Volatility (search for similar items in EconPapers)
JEL-codes: D03 G02 (search for similar items in EconPapers)
Date: 2019
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