A Converging Approach on Investment Strategies, Past Financial Information, and Investors' Behavioral Bias in the Korean Stock Market

주식투자 전략, 과거 재무정보, 투자자의 행태편향에 대한 융합적 연구

  • Received : 2016.09.28
  • Accepted : 2016.12.20
  • Published : 2016.12.31


This study attempts to empirically investigate if value strategy and momentum strategy could be improved by using past financial data such as ROE and PER in the Korean stock market. The study observes that both strategies which are refined by the portfolios consisting of companies with higher ROE/PER ratio show higher positive excessive returns than the traditional value strategy and momentum strategy. The study discusses that the excessive returns could be due to investors' behavioral biases such as conservatism, anchoring, confirmation, and herding by using convergent approach based on psychology theory. The results are not consistent with the efficient market hypothesis insisting investors' rational behavior.


value strategy;momentum strategy;excess return;past financial data;investors' behavioral bias


  1. Rosenberg, B., K. Reid, and R. Lanstein, "Persuasive Evidence of Market Inefficiency", Journal of Portfolio Management, Vol. 11, No. 3, pp. 9-17, 1985.
  2. Fama, Eugene, and Kenneth French, "The Cross-Section of Expected Stock Returns", Journal of Finance, Vol. 47, No. 2, pp. 427-465, 1992.
  3. Lakonishok, J., A. Shleifer, and R. Vishny, "Contrarian Investment, Extrapolation, and Risk", Journal of Finance, Vol. 49, No. 5, pp. 1541-1578, 1994.
  4. Piotroski, Joseph, "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers", Journal of Accounting Research, Vol. 38, Supplement, pp. 1-41, 2000.
  5. Jegadeesh, Narasimhan, and Sheridan Titman, "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency", Journal of Finance, Vol. 48, No. 1, pp. 65-91, 1993.
  6. Asness, Clifford, Tobias Moskowits, and Lasse Heje Pedersen, "Value and Momentum Everywhere", Journal of Finance, Vol. 58, No. 3, pp. 929-985, 2013.
  7. Duong, Chau, Gioia Pescetto, and Daniel Santamaria, "How Value-glamour Investors Use Financial Information: UK Evidence of Investors' Confirmation Bias", The European Journal of Finance, Vol. 20, No. 6, pp. 524-549, 2014.
  8. Fama, Eugene, and Kenneth French, "Dissecting Anomalies", Journal of Finance, Vol. 63, No. 4, pp. 1653-1678, 2008.
  9. Rabin, M., and J. Schrag, "First Impressions Matter: A Model of Confirmatory Bias", Quarterly Journal of Economics, Vol. 114, No. 1, pp. 37-82, 1999.
  10. Edwards, W., "Conservatism in Human Information Processing", in: Kleinmutz, B. (ed.), Formal Representation of Human Judgement. NY: John Wiley and Sons, pp. 17-52, 1968.
  11. Tversky, Amos, and Daniel Kahneman, "Judgement Under Uncertainty: Heuristics and Biases", Science 185, pp. 1124-1131, 1974.
  12. Meub, Lukas, and Till Proeger, "An Experimental Study on Social Anchoring", working paper. 2014.
  13. Barberis, Nicholas, Andrei Shleifer, and Robert Vishny, "A Model of Investment Sentiment", Journal of Financial Economics, Vol. 49, No. 3, pp. 307-343, 1998.
  14. Daniel, Kent, David Hirshleifer, and Avanidhar Subrahmanyam, "Investor Psychology and Security Market Under- and Overreactions", Journal of Finance, Vol. 53, No. 6, pp. 1839-1886, 1998.
  15. Koh, Seunghee, "Convergent Momentum Strategy in the Korean Stock Market", Korea Convergency Society Journal, Vol. 6, No. 4, pp. 127-132, 2015.
  16. Kim, Song-Geun, and Kee-Joon Seok, "Convergence of IT and Online Security Trading : The Effects of MTS Service Quality on Customer Satisfaction & Customer Loyalty", Journal of Digital Convergence, Vol. 13, No. 9, pp. 137-148, 2015.
  17. Byeon, Hyeon-Su, and Mi-Ra Kang, "The Study of Factors on Information System Success through Web Assimilation", Journal of Digital Convergence, Vol. 13, No. 11, pp. 85-97, 2015.
  18. Kim, Seokhoon, Ha-Min Kwak, "A Study on the Countermeasure Technology for Fin-Tech Optimized Financial Security", Journal of IT Convergence Society for SMB, Vol. 5, No. 4, pp. 25-30, 2015.
  19. Jeon, Jin-Ho, and Min-Soo Kim, "Determination of Pattern Models Using a Convergence of Time-Series Data Conversion Technique for the Prediction of Financial Markets", Journal of Digital Convergence, Vol. 13, No. 5, pp. 237-244, 2015.
  20. Koo, Hye-Gyoung, and Jong-Youn Rha, "Which Factors Could Affect Financial Consumer Problems Experience? - Convergence Approach of Both Technical Information and Subjective Competency", Journal of Digital Convergence, Vol. 13, No. 5, pp. 31-39, 2015.
  21. Choi, Sung-Wook, and Yong-Jae Shin, "Economy Effects of IT Industry on Financial and Insurance Services", Journal of Digital Convergence, Vol. 13, No. 1, pp. 191-203, 2015.
  22. Lee, Myoun-Jae, and Kyung-Il Khoe, "Development Method of Digital Content Finance- Focused on by Technical Value Evaluation", Journal of the Korea Convergence Society, Vol. 6, No. 6, pp. 111-117, 2015.