Empirical analysis on behavioral finance-financial behavior puzzles of firm and household-

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We have proceeded with the research on the upper project through the review of empirical analysis on behavioral finance studies1. We analyzed the disposition effect. Disposition means the tendency to sell stocks too early that have gained value and to keep stocks too long that have lost value relative to some reference point(for example, purchase point). The effect of this tendency depends on risk and reference point. We find that subjects tended to sell winner stocks quickly and to keep loser stocks. However, the disposition effects were greatly reduced when the stocks were automatically sold after a five percent fall in price.2. We examined the 52 week-high investment strategy(George and Hwang) and the 52 week-low investment strategy in the Japanese stock market. The result showed George and Huang strategy in the stock market does not gain a positive rate of returns. On the contrary, the strategy that buying the lowest stock compared with 52 week-high stock price and selling of 52 we … More ek-high stock price gets a positive rate of return. Especially, this performance is attributed to the portfolio that include small stocks.We examined the short-term and long-term momentum effect. The result showed the one month contrarian strategy that buying the extremely worst stocks and selling the extremely best stocks got a positive return. And we showed the upper half year effect.3. We examined the overconfidence. We presented evidence that there is great improvement in the rate of correct answers in survey with punishment. This evidence may be interpreted that investor's overconfidence is not so large as the supporters of behavioral finance. And we examined several recent papers on corporate restructuring, especially the relationship between corporate restructuring and financial performance. In considering this problem, we can evaluate improvements in operating performance following downsizing actions of Japanese firms.4. We examined corporate strategies regarding cross-shareholding and the unwinding of cross-shareholding, and we presented a rationale for corporate managers to unwind cross-shareholding enhances managerial entrenchment. The model proposed here explains why cross-shareholdings among Japanese firms declined during the 1990s, a decade during which the cost of takeovers decreased because of financial market dereguration. Less