Yang, Lizhengbo (2021) Three essays in behavioural finance. PhD thesis, University of Warwick.

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Abstract

This thesis consists of three essays in behavioural finance. With one essay in chapters 2, 3, and 4, respectively, this doctoral thesis studies the impact of air travel and cultural distance on financial market participants.

Chapter 2 examines whether international tourism affects financial market investments. Using data for more than 40 countries, we demonstrate that recreational travel between countries is associated with higher foreign equity investments. Increased foreign investment leads to a reduction in home bias and improved diversification. The impact of tourism is more potent for countries that are farther apart or when home country residents are more risk-averse. Using predictors of recreational travel as instruments, we show that the relation between foreign travel and foreign equity investments is causal. Collectively, these results suggest that tourism has positive externalities in financial markets.

Chapter 3 examines how air travel affects analyst coverage and forecast accuracy. Using air travel to proxy analysts’ information environment with firms, I find air travel from analyst location to firm headquarter location stimulates analyst coverage of firms. This effect is identified with the initiation of new air routes, and the terrorist attacks and mass shootings near firm headquarter city. The results also show that air travel stimulates optimism analyst forecast, confirming the hypothesis that air travel induces recognition heuristic rather than information advantage. However, the interaction effect of shared analyst coverage and air travel has positive externalities on stock comovement and return predictability.

Chapter 4 examines whether the risk preferences of S&P500 CEOs’ spouses have a spillover impact on corporate risk-taking, especially when CEOs and their spouses come from different cultural backgrounds. Our hypothesis is motivated by recent research in the social sciences that individual traits can converge over time within closely formed groups. To empirically test the hypothesis, we hand-collect data on CEOs’ and spouses’ cultural origins and test whether differences in risk-related cultural norms influence corporate risk-taking. We find that firms managed by CEOs married to spouses from relatively more risk-averse cultures will take on less corporate risk. These results are robust to various econometric specifications, including a model with CEO fixed effects in a sample of CEOs with more than one marriage. Overall, our findings suggest that the cultural composition of a CEO’s household affects corporate decisions.

Item Type:	Thesis (PhD)
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HE Transportation and Communications H Social Sciences > HG Finance
Library of Congress Subject Headings (LCSH):	Finance -- Psychological aspects, Tourism -- Economic aspects, Investments, Foreign, Air travel -- Forecasting, Risk management -- Social aspects, Chief executive officers -- Attitudes
Official Date:	September 2021
Dates:	Date Event September 2021 UNSPECIFIED
Institution:	University of Warwick
Theses Department:	Warwick Business School
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Antoniou, Constantinos ; Kumar, Alok
Format of File:	pdf
Extent:	x, 144 leaves : illustrations
Language:	eng

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