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Do Markets Think about Stocks Proportionally?

Author

Listed:
  • Cohen, Lior

Abstract

I examine whether investors perceive higher-priced stocks as riskier despite identical percentage price changes. Using survey evidence, the study investigates whether nominal stock prices influence decisions to sell during market downturns. The findings suggest that investors exhibit non-proportional reasoning, attributing significance to nominal price movements rather than proportional changes.

Suggested Citation

  • Cohen, Lior, 2026. "Do Markets Think about Stocks Proportionally?," EconStor Preprints 342228, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:342228
    as

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    File URL: https://www.econstor.eu/bitstream/10419/342228/1/Cohen-Stocks-Proportionally.pdf
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    References listed on IDEAS

    as
    1. Kelly Shue & Richard R. Townsend, 2021. "Can the Market Multiply and Divide? Non‐Proportional Thinking in Financial Markets," Journal of Finance, American Finance Association, vol. 76(5), pages 2307-2357, October.
    2. Birru, Justin & Wang, Baolian, 2016. "Nominal price illusion," Journal of Financial Economics, Elsevier, vol. 119(3), pages 578-598.
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    Keywords

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    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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