Journal of Distribution Science (유통과학연구)

Korea Distribution Science Association (한국유통과학회)
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An Investigation into Behavioral Biases Among Investors in Korean Distribution Firms

  • Jeong-Hwan LEE (Department of Economics and Finance, Hanyang University) ;
  • Se-Jun LEE (Department of Economics and Finance, Hanyang University) ;
  • Sam-Ho SON (Department of Economics and Finance, Soonchunhyang University)
  • Received : 2024.05.04
  • Accepted : 2024.09.05
  • Published : 2024.09.26
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Abstract

Purpose: This study examines how psychological heuristics influence stock price dynamics in Korea's distribution industry after significant price shocks. Research Design, Data, and Methodology: The study analyzes daily stock price movements exceeding 10% for Korean distribution companies from 1993 to 2022. It establishes anchoring heuristic reference points, including the 52-week high and low, and segments the sample based on company size and volatility. Results: We analyzed a sample previously studied by Lee et al. (2023). Our findings indicate that when a stock experiences a positive (negative) price shock near its 52-week high (or lowest price), investors in large (small) companies exhibit an optimism (pessimism) bias. This leads to overreactions and subsequent stock price reversals after the event date. Conversely, when a stock encounters a negative (positive) price shock near its 52-week high (or lowest price), investorstend to underreact due to anchoring heuristics. Thisresultsin a drift effect on the stock price after the event day. Notably, investor behavior around 52-week highs or lows directly impacts their heuristic behavior related to those price points. Conclusions: This paper uniquely examines behavioral biases among distribution-related stock investors in Korea, shedding light on stock price reversal and drift effects.

Keywords

Acknowledgement

This research was supported by the Soonchunhyang University Research Fund.

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