In honor of some recent gains in the stock market, a few interesting stock-related studies:
1) Left-Digit Effect: Investors buy stocks the same way they shop for toothpaste: They are seduced by prices that end in “.99.”This effect is called the “left-digit effect” — that is, the tendency to pay inordinate attention to the left-most digit in a price, and to read “$2.99″ as being significantly cheaper than “$3.00.” An abstract of the paper — which is by Utpal Bhattacharya, Craig W. Holden and Stacey E. Jacobsen at Indiana University-Bloomington — can be found here. Here’s a news article explaining the research in more detail...
...4) Aversion to the Mean: This study, by Luboš Pástor and Robert F. Stambaugh, finds that, contrary to conventional wisdom, a stock’s price doesn’t revert to the mean over a long time frame. In fact, “stocks are substantially more volatile over long horizons from an investor’s perspective.”>>>MORE