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Asymmetric Reinforcement Learning and Conditioned Responses During the 2007–2009 Global Financial Crisis: Evidence from Taiwan

Chih-Hsiang Chang, Shan-Shan Chen () and Song-Lin Hsieh ()
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Chih-Hsiang Chang: Department of Finance, National University of Kaohsiung, No. 700, Kaohsiung University Road, Nanzih District, Kaohsiung 81148, Taiwan
Shan-Shan Chen: Department of Finance, National University of Kaohsiung, No. 700, Kaohsiung University Road, Nanzih District, Kaohsiung 81148, Taiwan
Song-Lin Hsieh: Department of Finance, Shih Chien University, No. 70, Dazhi Street, Zhongshan District, Taipei 10462, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2017, vol. 20, issue 02, 1-44

Abstract: This study applies self-developed models using standardized regression analysis to investigate the learning behavior associated with investor sentiment and psychological pitfalls during the 2007–2009 Global Financial Crisis. The empirical results, which draw on reinforcement learning and classical conditioning perspectives, reveal asymmetric reinforcement learning behavior because investors report a higher tendency to avoid past unfavorable outcomes rather than repeat past favorable outcomes. The evidence also supports the conditioned response of psychological pitfalls to the Taiwanese government’s stimulus measures during 2007–2009; however, no concrete evidence supports the conditioned response of investor sentiment.

Keywords: Asymmetric reinforcement learning; investor sentiment; psychological pitfalls; 2007–2009 Global Financial Crisis; conditioned responses (search for similar items in EconPapers)
Date: 2017
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