Anchoring Adjusted Capital Asset Pricing Model
Copyright policy )Anchoring Adjusted Capital Asset Pricing Model
What happens when the capital asset pricing model is adjusted for the anchoring and adjustment heuristic of Tversky and Kahneman [1974]? The surprising finding is that adjusting the capital asset pricing model for anchoring provides a plausible unified framework for understanding almost all of the key asset pricing anomalies. The anomalies captured in the theoretical framework include the well-known size and value effects, high alpha of low beta stocks, accruals, low volatility anomaly, momentum effect, stock splits, and reverse stock splits. The market equity premium is also larger with anchoring. This suggests that the anchoring-adjusted capital asset pricing model may provide the needed unifying structure to behavioral finance.
- Ludwig-Maximilians-Universität München Germany
- University of Queensland Australia
- University of Queensland Australia
- University of the Sunshine Coast Australia
- University of Queensland Australia
330, Size premium, School of Economics, Anchoring and adjustment heuristic, Low volatility anomaly, Momentum effect, FoR 1502 (Banking, G11 - Portfolio Choice, Trading Volume, behavioral finance, Equity premium puzzle, equity premium puzzle, Auditing and Accountability), CAPM, size premium, value premium, Stock splits, accrual anomaly, low-beta-high-alpha, Value premium, Accrual anomaly, G12 - Asset Pricing, G02 - Behavioral Finance: Underlying Principles, Investment Decisions, stock splits, Bond Interest Rates, Low-beta-high-alpha, 3205 Experimental and Cognitive Psychology, asset pricing, Asset pricing, anchoring and adjustment heuristic, low volatility anomaly, FoR 1501 (Accounting, 2003 Finance, Behavioral finance, G10 - General, momentum effect, Finance and Investment)
330, Size premium, School of Economics, Anchoring and adjustment heuristic, Low volatility anomaly, Momentum effect, FoR 1502 (Banking, G11 - Portfolio Choice, Trading Volume, behavioral finance, Equity premium puzzle, equity premium puzzle, Auditing and Accountability), CAPM, size premium, value premium, Stock splits, accrual anomaly, low-beta-high-alpha, Value premium, Accrual anomaly, G12 - Asset Pricing, G02 - Behavioral Finance: Underlying Principles, Investment Decisions, stock splits, Bond Interest Rates, Low-beta-high-alpha, 3205 Experimental and Cognitive Psychology, asset pricing, Asset pricing, anchoring and adjustment heuristic, low volatility anomaly, FoR 1501 (Accounting, 2003 Finance, Behavioral finance, G10 - General, momentum effect, Finance and Investment)
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