Investor Behavior

Evaluating Company-specific Biases in Financial Sentiment Analysis using Large Language Models ArXiv ID: 2411.00420 “View on arXiv” Authors: Unknown Abstract This study aims to evaluate the sentiment of financial texts using large language models~(LLMs) and to empirically determine whether LLMs exhibit company-specific biases in sentiment analysis. Specifically, we examine the impact of general knowledge about firms on the sentiment measurement of texts by LLMs. Firstly, we compare the sentiment scores of financial texts by LLMs when the company name is explicitly included in the prompt versus when it is not. We define and quantify company-specific bias as the difference between these scores. Next, we construct an economic model to theoretically evaluate the impact of sentiment bias on investor behavior. This model helps us understand how biased LLM investments, when widespread, can distort stock prices. This implies the potential impact on stock prices if investments driven by biased LLMs become dominant in the future. Finally, we conduct an empirical analysis using Japanese financial text data to examine the relationship between firm-specific sentiment bias, corporate characteristics, and stock performance. ...

How Competitive is the Stock Market? Theory, Evidence from Portfolios, and Implications for the Rise of Passive Investing ArXiv ID: ssrn-3821263 “View on arXiv” Authors: Unknown Abstract The conventional wisdom in finance is that competition is fierce among investors: if a group changes its behavior, others adjust their strategies such that noth Keywords: Market Efficiency, Investor Behavior, Game Theory, Strategic Interaction, Equities Complexity vs Empirical Score Math Complexity: 7.5/10 Empirical Rigor: 7.0/10 Quadrant: Holy Grail Why: The paper employs a semi-structural economic model with equilibrium conditions, endogenous elasticities, and formal estimation challenges (reflection problem, endogeneity), requiring advanced mathematics. It is empirically rigorous, using detailed institutional portfolio data and a novel identification strategy with instruments to estimate the demand system and the strategic response of investors. flowchart TD A["Research Goal: Quantify investor competition<br>and its implications for passive investing"] --> B["Methodology: Game-theoretic model<br>of strategic portfolio choice"] B --> C["Data: US equity market portfolios<br>1980-2015 (CRSP)"] C --> D["Computational Process:<br>Simulate competitive equilibria<br>under varying investor assumptions"] D --> E["Key Findings:<br>1. Competition is strong but incomplete<br>2. Passive investing reduces competition<br>3. Market efficiency varies with investor structure"]

The Dividend Disconnect ArXiv ID: ssrn-2876373 “View on arXiv” Authors: Unknown Abstract Many individual investors, mutual funds and institutions trade as if dividends and capital gains are disconnected attributes, not fully appreciating that divide Keywords: Dividend Policy, Capital Gains, Investor Behavior, Tax Arbitrage, Equity Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 8.5/10 Quadrant: Street Traders Why: The paper focuses on behavioral trading patterns and market implications using extensive real-world datasets and robust empirical analysis, with minimal advanced mathematical formalism. flowchart TD A["Research Question<br>How do investors perceive<br>dividends vs. capital gains?"] --> B["Data Source<br>Discount Brokerage Dataset"] B --> C["Methodology<br>Event Study of Ex-Dividend Days"] C --> D{"Computation<br>Compare Price Drop to Dividend"} D --> E["Trading Activity Analysis"] E --> F["Key Finding 1<br>Tax Inefficiency<br>Sell winners & buy losers"] E --> G["Key Finding 2<br>Dividend Disconnect<br>Treat cash flows as separate assets"] F --> H["Outcome<br>Rationality gap in investor behavior"] G --> H

Chapter 1: Investor Behavior: An Overview ArXiv ID: ssrn-2385229 “View on arXiv” Authors: Unknown Abstract “Investor Behavior: An Overview” is the introduction chapter for the book Investor Behavior: The Psychology of Financial Planning and Investing edited by H. Ken Keywords: Investor Behavior, Psychology of Finance, Financial Planning, Behavioral Finance, Investing Psychology, Behavioral Finance (Cross-Asset) Complexity vs Empirical Score Math Complexity: 1.0/10 Empirical Rigor: 0.0/10 Quadrant: Philosophers Why: The content is a conceptual overview of investor behavior, focusing on psychological and planning principles rather than mathematical modeling or empirical backtesting. flowchart TD A["Research Goal: Define Investor Behavior<br/>& Behavioral Finance Principles"] --> B["Key Methodology: Literature Review &<br/>Theoretical Framework Analysis"] B --> C["Data/Inputs: Academic Research,<br/>Psychological Models, Market Data"] C --> D["Computational Processes: Synthesis &<br/>Cross-Asset Behavioral Mapping"] D --> E["Key Findings: Core Biases Identified,<br/>Impact on Financial Planning & Investing"]

Beyond Markowitz: A Comprehensive Wealth Allocation Framework for Individual Investors ArXiv ID: ssrn-925138 “View on arXiv” Authors: Unknown Abstract In sharp contrast to the recommendations of Modern Portfolio Theory (MPT), a vast majority of investors are not well diversified. This neglect of diversificatio Keywords: portfolio diversification, modern portfolio theory, asset allocation, investor behavior, risk management, Multi-Asset / Equities Complexity vs Empirical Score Math Complexity: 3.0/10 Empirical Rigor: 2.0/10 Quadrant: Philosophers Why: The paper proposes a conceptual framework extending Markowitz by adding personal and aspirational risk dimensions, relying on qualitative discussion and examples rather than dense mathematical derivations or rigorous backtesting. flowchart TD R["Research Goal: Why do investors fail to diversify despite MPT?"] --> M["Methodology: Qualitative Analysis of Investor Behavior"] M --> D["Data Inputs: Empirical Data & Behavioral Observations"] D --> C["Computational Process: Multi-Asset Portfolio Simulation"] C --> F["Key Findings: Investors prioritize simplicity and familiarity over theoretical optimal allocation"] F --> O["Outcome: Proposed Comprehensive Wealth Allocation Framework"]