Research On The Impact Of Anchoring Ratio On Stock Expected Return

Under the influence of many factors such as information uncertainty,the efficiency of information transmission,and their own experience,people are often affected by anchoring bias in the decision-making process.This influence is reflected in various aspects,such as the judgment of judges in court,the evaluation of athletes’ performance,and the valuation of real estate.In recent years,with the in-depth research on behavioral finance,scholars have found that investors are also affected by anchoring bias in the process of decision-making,which will lead to the deviation between the actual value and the intrinsic value of the stock.Therefore,it is of great significance to study the impact of anchoring effect in the stock market in investment decision-making and investment management.Based on the previous research experience,this paper uses the daily data of individual stocks to construct a monthly anchor ratio indicator,which measures the behavior of investors referring to different anchor points under different market conditions,and it can better indicate the Chinese market exist anchoring effect.This paper focuses on empirical analysis of the impact of this anchor ratio on stock expected returns.First,this paper uses univariate portfolio analysis to analyze the short-term and long-term performance of anchoring ratios,and then uses binary portfolio analysis to analyze the performance of the anchoring ratio after removing the influence of some company characteristics,and the explanation of pricing factor on the excess return of anchored ratio stock portfolio.Then,this paper uses Fama-Macbeth regression to examine whether the predictive power of anchoring ratios on expected stock returns can be explained by common company characteristics.Finally,this paper shows that the conclusion of this paper is robust through a series of robustness tests,such as replacing the pricing factor model,eliminating extreme values,grouping the sample according to economic prosperity,grouping the sample according to investor sentiment,and dividing the sample into four rolling subsamples.After the above empirical analysis,this paper draws the following conclusions:(1)The anchor ratio proposed in this paper can affect the expected return of a stock.In the short term,the stock portfolio based on the anchoring ratio can obtain significant excess returns.After controlling for lots of firm characteristics,the excess return of the anchoring ratio stock portfolio is still significant.(2)Existing pricing factors cannot explain the abnormal returns generated by the anchoring ratio stock portfolio after excluding the influence of other company characteristics,it shows that the anchoring ratio unlike other company characteristics,and the anchoring effect does exist in the chinese stock market.(3)After using Fama-Macbeth regression analysis,some common firm characteristics selected in this paper can not explain the predictive power of anchoring ratios on stock expected returns.In conclusion,the results of this paper suggest that the anchor ratio proposed in this paper has a short-term predictive power on future stock returns.