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BUSI 701 - Reply Discussion Finance
Violas
Advanced Business Research Methods (Liberty
University)
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BUSI 701 – Reply to Week 2 Discussion Board -
Finance Behavioral Finance
Michael Viola
Dr. C. Brandt Smith
Jr. September 9, 2020
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Tin Latt Mohamed Ahmed Jamal effectively defined the study of behavioral finance in
his writings. He further wrote on the subtopic of investor reaction from the current trends in
behavioral finance research. To further explore the topic of investor reaction and decision
making, I recommend Tin Latt Mohamed Ahmed Jamal review the article by Pevzner et al.
(2015) titled “When firms talk, do investors listen? The role of trust in stock market reactions to
corporate earnings announcements.”
This peer review article is relevant because Pevzner et al. (2015) established a direct
correlation between the effect of social trust in a country and investor reaction to corporate
earnings announcements. They measured investor reaction to earnings announcements by
trending abnormal return variances and abnormal trading volumes (Pevzner et al. 2015). Their
research found evidence that returnability and trading volume generated by earnings
announcements increased with the precision and importance of the new information. Their
research further demonstrated that there was positive investment behavior to new earning
announcements when a country’s average level of education was lower (Pevzner et al.
2015). These investors tended to trust the companies more and have more confidence in the new
announced information than countries with higher levels of education.
Pevzner et al. (2015) asserted that economic growth and social efficiency is a result of a
higher level of investor trust. Trust underlies virtually every decision we make. God promises
joy if we put our trust in him, “But let all those that put their trust in thee rejoice: let them ever
shout for joy, because thou defendest them: let them also that love thy name be joyful in thee”
(King James Bible, 1769/2017, Psalms 5:11).
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References
King James Bible. (2017). King James Bible Online.
https://www.kingjamesbibleonline.org/ (Original work published
1769)
Pevzner, M., Xie, F., & Xin, X. (2015). When firms talk, do investors listen? The role of trust in
stock market reactions to corporate earning announcements. Journal of Financial
Economics, 117(1), 190-223. https://doi-
org.ezproxy.liberty.edu/10.1016/j.jfineco.2013.08.004
