Darren Duxbury

• Chair at Newcastle University

As climate variability is increasing, extreme events such as temperature fluctuations are expected to become more frequent. Low- and middle-income countries (LMICs) are especially vulnerable to heat-related variability and its ensuing impacts on mortality. Therefore, there is an urgent need to understand how citizens in LMICs trade-off climate-rela...

Financial markets play a vital role in shaping corporate behaviour, impacting corporate financial decisions ranging from investment and mergers/acquisitions to payout policies and management renumeration. Financial markets, however, are prone to irrational sentiments to trade, driving prices away from fundamental values, with the potential to disto...

The impact of climate change on human health was identified as a priority for the UN COP26 conference. In this article, we consider climate-induced changes to mortality risks and how to incorporate these formally in the policy appraisal process. In the United Kingdom (UK), the Value of Statistical Life (VSL) is used to monetarize the benefits of po...

Traditional finance theory posits a positive risk–return relation, but empirical evidence is inconclusive. Retail investor sentiment has long been viewed as a distorting factor, while more recently institutional investor sentiment is thought to play a role. We examine the separate and joint impacts of retail and institutional investor sentiments on...

While investor sentiment has been shown to have a robust, direct impact on stock returns, we know little about how it impacts returns through an indirect channel from conditional volatility. We conduct a global study of investor sentiment across 40 international stock markets to examine the impact of investor sentiment on stock returns via both dir...

Although a cornerstone of traditional finance theory, empirical evidence in support of a positive mean-variance relation is far from conclusive, with the behavior of retail investors commonly thought to be one of the root causes of departures from this expected relationship. The behavior of institutional investors, conventionally thought to be soph...

The regulatory protection of credit consumers, in general, is paramount due to the considerable use of credit, the imbalanced bargaining positions of the contracting parties and the adverse effect of over-indebtedness on individuals and society alike. These concerning factors are worsened in the case of High-Cost Short-Term Credit (HCSTC) consumers...

An increasing percentage of the total net assets under professional management is devoted to ethical investments. Socially responsible investment (SRI) funds have a dual objective: building an investment strategy based on environmental, social, and corporate governance (ESG) screens and providing financial returns to investors. In the current study...

We assess the impact of investor sentiment on future stock returns in 50 global stock markets. Using the consumer confidence index (CCI) as the sentiment proxy, we document a negative relationship between investor sentiment and future stock returns at the global level. While the separation between developed and emerging markets does not disrupt the...

We applied Item Response Theory (IRT) to construct and evaluate new brief and in‐depth financial literacy scales. A survey of a UK adult sample (N = 589) included 50 questions to assess knowledge about managing financial resources and competence in using personal finance‐related information – including five widely used items, on interest rates – in...

We develop a conceptual analysis and account of how emotions influence behavior in financial markets. To motivate our approach and to establish the need for such research, we first review the increasingly important literature on emotions in financial markets. While emotions influence investors in financial markets, there is a lack of precision conc...

We investigate the influence of national culture on corporate investment–cash flow sensitivity. We conjecture that national culture shapes managerial perceptions of information asymmetry and agency problems, thus impacting the investment–cash flow relationship. We document empirical evidence in support of our claim. By linking the investment–cash f...

Financial models incorporating a reference point, such as the Capital Gains Overhang (CGO) model, typically assume it is fixed at the purchase price. Combining experimental and market data, this paper examines whether such models can be improved by incorporating reference-point adjustment. Using real stock prices over horizons from 6 months to 5 ye...

While it has been demonstrated that momentum or contrarian trading strategies can be profitable in a range of institutional settings, less evidence is available concerning the actual trading strategies investors adopt. Standard definitions of momentum or contrarian trading strategies imply that a given investor applies the same strategy to both the...

Stock prices in financial markets rise and fall, sometimes dramatically, thus asset returns exhibit volatility. In finance theory, volatility is synonymous with risk and as such represents the dispersion of asset returns about their central tendency (i.e. mean), measured by the standard deviation of returns. When individuals make investment decisio...

Purpose – The purpose of this second of two companion papers is to further review the insights provided by experimental studies examining financial decisions and market behavior. Design/methodology/approach – Focus is directed on those studies examining explicitly, or with direct implications for, the most robustly identified phenomena or stylized...

Purpose – The purpose of this paper, and a companion paper (Duxbury, 2015), is to review the insights provided by experimental studies examining financial decisions and market behavior. Design/methodology/approach – Focus is directed on those studies examining explicitly, or with direct implications for, the most robustly identified phenomena or s...

This paper uses investor-level data to examine jointly the tendency of investors to succumb to the disposition effect and the house money effect; two behavioral biases premised on seemingly contradictory responses to prior gains/losses. We document three novel findings. First, the two effects can contemporaneously coexist in a single stock market a...

Investors have been shown to have particular preferences when it comes to the characteristics of stock they hold in their portfolios, while prior gains and losses have been shown to impact on individuals’ economic decisions, both in an investment context and more widely. This paper is the first to investigate how prior gains and losses affect inves...

The shift from defined benefit (DB) to defined contribution (DC) private pension arrangements coupled with the widespread reluctance to annuitize retirement savings is causing growing economic concern in developed countries. This study considers the impact of the salient decision point made explicit in DC schemes, but masked in DB schemes; namely,...

Prior experimental studies supporting the prospect theory explanation of the sunk-cost effect manipulate the framing of the initial investment, describing it either in neutral terms or as a prior loss. This paper subjects the prospect theory explanation to further examination, but takes an alternative experimental approach based on the differential...

The influence of emotions on decision making is widely accepted, particularly in relation to incidental emotions and moods. The influence of specific emotions integral to a decision is, perhaps, less explored. Explanations of many behavioral anomalies exist that exclude such emotions as important elements, but this may be an oversight – might it be...

Drawing on relevant literature from a diverse range of academic disciplines we present a conceptual framework intended to further our understanding of perceptions and expectations of price changes and inflation. Based on this framework, we provide a detailed review of the literature and an analysis of open issues in current research. The review is...

Signaling theories of the pricing of initial public offerings are based on an equilibrium which separates high from low quality companies. In empirically testing these theories one issue which needs addressing is how to identify high and low quality companies. This paper develops a new test of signaling theory where the success or failure of a comp...

This paper investigates experimentally the role of emotions in a robust behavioral anomaly, the disposition effect. We manipulate choice and responsibility for subsequent gains and losses, thus influencing the anticipated and experienced emotions at play. Merely experiencing a gain or loss, in the absence of responsibility, is not sufficient to pro...

Purpose This paper seeks to investigate the effect of the PricewaterhouseCoopers (PwC) merger on the market for audit services in the UK. To this end a “what if” analysis is conducted comparing estimated outcomes prior to the merger with those expected under post‐merger conditions. Particular attention is given to the effect of the merger on the re...

We investigate how individuals' asset allocations in their portfolios vary with age, considering the relationship between individual attitudes and behavior. We find individuals' portfolios become more risk-seeking with age, even taking account of asset accumulation, counter to their intuition.

The reasons for the highly efficient market outcomes observed under the double auction remain unclear. This paper presents a series of experimental financial markets designed to investigate the importance of unknown trading period duration on trading behavior and the convergence tendencies of such markets. Using panel data techniques the results su...

The lack of understanding of pensions amongst a large proportion of the UK adult population, combined with low levels of financial literacy generally, have been identified as significant barriers to saving for retirement. This article draws on the findings of the International Institute of Banking and Financial Services Financial Well-being Survey...

Evidence from the behavioural decision literature suggests that economic decisions may be made on less than rational grounds. In this respect the formation of ‘mental accounts’ by individuals has been used to explain apparent departures from rationality in certain scenarios. The purpose of this paper is to establish the general applicability of men...

Some sections of society have expressed concerns that consumer debt has risen to a dangerous level. However, there is little evidence regarding how consumers themselves feel about debt. This paper reports up-to-date findings from the International Institute of Banking and Financial Services’ Financial Well-being Survey about consumers’ attitudes to...

Investment advice is typically at odds with mainstream finance theory, but assessing its appropriateness requires information concerning individuals' attitudes and actual investment behavior. We find a dissonance, with individuals' beliefs following investment advice, but their investment behavior following finance theory.

Finance theory tends to see risk as related to variance in expected returns, whereas the psychology literature tends to link risk to probability or size of potential losses. This paper investigates whether individuals' perceptions of risk are linked to variance aversion or loss aversion, and finds that a link to loss aversion is supported.

Finance theory tends to see risk as related to variance in expected returns, whereas the psychology literature tends to link risk to probability or size of potential losses. This paper investigates whether individuals' perceptions of risk are linked to variance aversion or loss aversion, and finds that a link to loss aversion is supported.

This paper examines empirically the effects of management ownership and ownership by large external shareholders on the capital structure of the firm from an agency theory perspective. The paper extends the US literature on the topic by examining the effect of interactions between management ownership and ownership by large external shareholders on...

The experimental asset market literature provides strong evidence concerning the robust convergence of transaction prices to the competitive equilibrium price and the high percentage of gains from trade exhausted in double auction (DA) markets. However, the designs of previous experimental asset market studies have incorporated trading period durat...

The practice of organisations adopting performance measurement systems that utilise a range of key performance indicators linked to various aspects of corporate strategy has become widespread. At the same time, however, many organisations are developing reporting frameworks that summarise these indicators in the form of a league table, ranking sub-...

The formation of `mental accounts' by individuals has been hypothesised to explain an apparent departure from rationality in certain decision-making scenarios. In particular, the potential monetary saving on an item is viewed, topically, relative to the original expected cost of that item, rather than relative to the original, expected cost of all...

The formation of 'mental accounts' by individuals has been hypothesised to explain an apparent departure from rationality in certain decision-making scenarios. In particular, the potential monetary saving on an item is viewed, topically, relative to the original expected cost of that item, rather than relative to the original, expected cost of all...

This exploratory paper reports a pilot study of the impact of random period duration on the trading behaviour observed in experimental financial markets. Results reported in earlier experimental studies, many of which report a flurry of trade just prior to the end of a trading period, may have been influenced by knowledge of trading period duration...

This exploratory paper reports a pilot study of the impact of random period duration on the trading behaviour observed in experimental financial markets. Results reported in earlier experimental studies, many of which report a flurry of trade just prior to the end of a trading period, may have been influenced by knowledge of trading period duration...

This paper addresses the concept of market efficiency, presenting a critical review of the conventional tests in the area, which in turn provides the justification for employing an experimental methodology. The literature on experimental asset markets within finance is then reviewed and evaluated. Copyright 1995 by Blackwell Publishers Ltd

This paper investigates financial risk perception, evaluating the influence of the peak of the return distribution. Variance and skew are manipulated experimentally to operationalize movement of the peak of the distribution vertically and horizontally, respectively. The results provide strong support for the existence of a 'peak evaluation heuristi...

This paper examines the stock market reaction to seasoned equity offering announcements. In an attempt to better understand the behavioural response of investors to such equity issues, the study draws together two separate strands of literature and is the first to examine jointly the market value reaction and trading volume effect of equity offerin...

Emotions have a strong influence on behavior generally, and there is an increased recognition that this is true of economic behavior too. This paper contributes to the growing evidence that emotions impact decisions and so shape economic behavior. For a number of behavioral anomalies there are accepted explanations that do not include emotions as i...