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Confidence, opinions of market efficiency, and investment behavior of finance professors

  • Doran, James S.
  • Peterson, David R.
  • Wright, Colby

We identify finance professors' opinions on the efficiency of the stock markets in the United States and assess whether their views on efficiency influence their investing behavior. Employing a survey distributed to over 4,000 professors, we obtain four main results. First, most professors believe the market is weak to semi-strong efficient. Second, twice as many professors passively invest than actively invest. Third, our respondents' perceptions regarding market efficiency are almost entirely unrelated to their trading behavior. Fourth, the investment objectives of professors are, instead, largely driven by the same behavioral factor as for amateur investors-one's confidence in his own abilities to beat the market, independent of his opinion of market efficiency.

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Article provided by Elsevier in its journal Journal of Financial Markets.

Volume (Year): 13 (2010)
Issue (Month): 1 (February)
Pages: 174-195

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Handle: RePEc:eee:finmar:v:13:y:2010:i:1:p:174-195
Contact details of provider: Web page: http://www.elsevier.com/locate/finmar

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  1. Welch, Ivo, 2000. "Views of Financial Economists on the Equity Premium and on Professional Controversies," The Journal of Business, University of Chicago Press, vol. 73(4), pages 501-37, October.
  2. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
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  5. Meir Statman & Steven Thorley & Keith Vorkink, 2006. "Investor Overconfidence and Trading Volume," Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1531-1565.
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  7. Brad M. Barber & Terrance Odean, 2001. "Boys Will Be Boys: Gender, Overconfidence, And Common Stock Investment," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 261-292, February.
  8. John R. Graham & Campbell R. Harvey & Shiva Rajgopal, 2004. "The Economic Implications of Corporate Financial Reporting," NBER Working Papers 10550, National Bureau of Economic Research, Inc.
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