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How value-glamour investors use financial information: UK evidence of investors' confirmation bias

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  • Chau Duong
  • Gioia Pescetto
  • Daniel Santamaria

Abstract

This paper investigates how investors in value and glamour stocks use financial information. The empirical evidence presented is in line with a model of investors' asymmetric reaction to good and bad news due to confirmation bias. Pessimistic value investors typically under-react to good financial information, while they process bad information rationally or over-confidently. On the contrary, glamour investors are often too optimistic to timely update prices following bad financial information, while they are likely to fairly price or even over-react when receiving good information.

Suggested Citation

  • Chau Duong & Gioia Pescetto & Daniel Santamaria, 2014. "How value-glamour investors use financial information: UK evidence of investors' confirmation bias," The European Journal of Finance, Taylor & Francis Journals, vol. 20(6), pages 524-549, June.
  • Handle: RePEc:taf:eurjfi:v:20:y:2014:i:6:p:524-549
    DOI: 10.1080/1351847X.2012.722117
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    References listed on IDEAS

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