X-CAPM REVISITED: THE INSTITUTIONAL EXTRAPOLATIVE CAPITAL ASSET PRICING MODEL (I-X-CAPM)

Semen Son-Turan () and Erdem Kilic
Additional contact information
Semen Son-Turan: MEF University, Turkey

Eurasian Journal of Business and Management, 2018, vol. 6, issue 3, 1-9

Abstract: This study constructs and tests a consumption-based asset pricing model in which some investors form beliefs about future price changes in the stock market by extrapolating past price changes, while other investors hold fully rational beliefs. The contribution of the present work is the inclusion of institutional investor bias. As such it extends theory. But it also conducts econometric tests by using daily survey data on individual and institutional investors’ sentiment on the current economic situation and their future expectations. Empirical findings may imply that institutions’ sentiment reverts quicker to the equilibrium price than individual sentiment, at least with regard to their beliefs on future economic outlook. If studied further with a bigger dataset, it may imply that institutional investors are closer to the rational-decision making mechanism compared to individual investors. The theoretical framework rests on prospect theory. The market studied is the US equity market, however findings and suggestions can be applied to global markets and various financial instruments.

Keywords: Investor Bias; Behavioral Finance; Institutional Investors; Capital Asset Pricing Model; Extrapolation (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://eurasianpublications.com/wp-content/uploads/2021/02/EJBM-6.3.1-2.pdf (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ejn:ejbmjr:v:6:y:2018:i:3:p:1-9

Access Statistics for this article

Eurasian Journal of Business and Management is currently edited by Nidžara Osmanagić-Bedenik

More articles in Eurasian Journal of Business and Management from Eurasian Publications
Bibliographic data for series maintained by Esra Barakli ().