Behavioral finance impacts on US stock market volatility: an analysis of market anomalies

Akin, I ORCID: 0000-0003-0918-7441 and Akin, M ORCID: 0000-0002-9021-869X (2024) 'Behavioral finance impacts on US stock market volatility: an analysis of market anomalies.' Behavioural Public Policy. doi: 10.1017/bpp.2024.13

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Official URL: https://doi.org/10.1017/bpp.2024.13

Abstract

This study investigates the impacts of behavioral finance on stock market volatility. The primary aims are to explain the reasons behind changes in the S&P 500 price within the context of behavioral finance and to analyze investor behavior in response to these changes. To achieve this, the research employs time-series analysis over a 10-year period, focusing on the S&P 500, real interest rates, consumer confidence, market volatility and credit default swaps while considering the effects of behavioral biases. The findings reveal several significant correlations: rising real interest rates negatively affect stocks due to loss aversion and sentiment. Conversely, higher consumer confidence tends to positively influence the stock market, driven by herding behavior and optimism. Additionally, market volatility shows a negative correlation with the S&P 500, influenced by risk aversion, recency bias and herding behavior. Moreover, an increase in credit default swap rates leads to stock market declines, primarily influenced by risk perception, loss aversion and herding behavior.

Item Type:	Article
UN SDGs:	Goal 1: No Poverty Goal 8: Decent Work and Economic Growth
Keywords:	behavioral finance, stock market, time-series analysis, market anomalies, investor behavior
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HG Finance H Social Sciences > HJ Public Finance
Divisions:	Bath Business School
Date Deposited:	15 Mar 2024 09:46
Last Modified:	02 Oct 2024 12:14
ISSN:	2398-063X
URI / Page ID:	https://researchspace.bathspa.ac.uk/id/eprint/16166

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