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Acquisition of Information and Share Prices: An Empirical Investigation of Cognitive Dissonance

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  • Elena Argentesi
  • Helmut Lütkepohl
  • Massimo Motta

Abstract

This paper deals with the determinants of agents' acquisition of information. Our econometric evidence shows that the general index of Italian share-prices and the series of Italy's financial newspaper sales are cointegrated, and the former series Granger-causes the latter, thereby giving support to the cognitive dissonance hypothesis: (non-professional) agents tend to buy the newspaper when share prices are high and not to buy it when share prices are low. Instead, we do not find support for the hypothesis that the agents acquire information in order to trade in the stock market: we find no relationship between quantities exchanged in the market and newspaper sales, nor between stock market volatility and newspaper sales. Copyright 2009 The Authors. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd. 2009.

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Bibliographic Info

Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 11 (2010)
Issue (Month): (08)
Pages: 381-396

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Handle: RePEc:bla:germec:v:11:y:2010:i::p:381-396

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References

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  1. Joël Peress, 2004. "Wealth, Information Acquisition, and Portfolio Choice," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 879-914.
  2. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
  3. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
  4. Luigi Guiso & Tullio Jappelli, 2006. "Information Acquisition and Portfolio Performance," CeRP Working Papers 52, Center for Research on Pensions and Welfare Policies, Turin (Italy).
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  6. Leeat Yariv, 2002. "I'll See It When I Believe It - A Simple Model of Cognitive Consistency," Cowles Foundation Discussion Papers 1352, Cowles Foundation for Research in Economics, Yale University.
  7. Matthew Rabin, 2003. "A Perspective on Psychology and Economics," General Economics and Teaching 0303003, EconWPA.
  8. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
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  10. Lutkepohl, Helmut & Reimers, Hans-Eggert, 1992. "Granger-causality in cointegrated VAR processes The case of the term structure," Economics Letters, Elsevier, vol. 40(3), pages 263-268, November.
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  14. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
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  17. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
  18. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
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Citations

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Cited by:
  1. Riccardo Ferretti & Francesco Pattarin, 2008. "Is public information really public? The role of newspapers," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 08013, Universita di Modena e Reggio Emilia, Facoltà di Economia "Marco Biagi".
  2. Margarida Abreu & Victor Mendes, 2011. "Information, Overconfidence and Trading: Do the Sources of Information Matter?," Working Papers Department of Economics 2011/25, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  3. M. Middeldorp & S. Rosenkranz, 2008. "Information acquisition in an experimental asset market," Working Papers 08-25, Utrecht School of Economics.
  4. Abreu, Margarida & Mendes, Victor, 2012. "Information, overconfidence and trading: Do the sources of information matter?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 868-881.

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