دانلود رایگان مقاله انگلیسی نظریه چشم انداز و بازده اوراق قرضه شرکتی: یک مطالعه تجربی - الزویر 2018

abstract

Since the 1980s, prospect theory has been considered as the most successful descriptive theory for decision making. In this paper, we examine the predictive power of prospect theory in the U.S. corporate bond market. The empirical evidence shows that prospect theory has significant predictive power for corporate bond returns, especially for junk bond returns. Unlike the findings for the stock market, the loss aversion component plays the most important role in predicting corporate bond returns. The probability weighting component also plays a predictive role for junk bonds, but not for investment-grade bonds.

6. Conclusion

One important implication for prospect theory is that investors evaluate a financial product by the prospect theory value of its historical return distribution. There is evidence that prospect theory has predictive power for stock returns. However, whether it has predictive power in the corporate bond market is still an open question. In this paper, we examine whether investors evaluate bonds through a mental process that is captured by prospect theory using U.S. corporate bond market data that covers from January 1973 to December 2013. The bonds with higher (lower) prospect theory value are attractive (unattractive) to investors hence be overvalued (undervalued) and earn lower (higher) future returns. This prediction is tested through both portfolio and regression analysis. The results consistently show that bonds with higher (lower) prospect theory values will on average earn lower (higher) future returns. These results are robust for different specifications of the prospect theory value. Since junk bonds are prohibited to most institutional investors, they are traded more by individual investors. The predictive power of prospect theory is stronger for junk bonds than that for investment-grade bonds. This implies that individual investors tend to rely more on System 1 thinking when making decisions, while institutional investors employ System 2 thinking more to overwrite or revise their decisions made by System 1 thinking. Unlike the findings in stock market, our results show that the loss aversion component contributes the most to prospect theory’s predictive power. The probability weighting component plays an important predictive role only for junk bonds.