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Essays on International Asset Management: Evidence for Developed West and Emerging East


Marina Nikiforow

Asset management is a global business, spreading from developed financial centers to emerging and transition markets. Empirical analyses of professional investors’ investment processes are justified not only by their key role in the traditional finance theory, as rational agents contributing to market efficiency, but also by the behavioral finance, finding evidence on irrational biases in their investment behavior. This study provides survey evidence on views and investment behavior of 772 fund managers from 274 investment companies in the USA, Germany, Thailand, Russia and Ukraine. New insights are gained on the persistency of behavioral biases. Cross-country comparisons shed light on fund managers’ information processing and investment behavior in different institutional market settings.


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2. Professionals’ endorsement of behavioral finance: Does it impact their perception of markets and themselves? 9


2. Professionals’ endorsement of behavioral finance: Does it impact their perception of markets and themselves?7 2.1 Introduction The history of many anomalies in financial markets has shown that they disappear over time (Fama, 1998). This has raised the suspicion that markets may need time to recognize such anomalies – which largely motivate behavioral finance – but that they react consequently afterwards. According to this view one may assess behavioral finance being largely concerned with transitory phenomena. Others argue that many behavioral finance patterns are so deeply rooted in human behavior that they are difficult to overcome by learning (Alpert and Raiffa, 1982, Fischhoff, 1982b, Tversky and Kahneman, 1982, and more recently Hirshleifer, 2001). Obviously, these two views make contrary predictions on the persistence of behavioral phenomena although both camps agree that in the long run fundamentals drive prices. If rational learning is dominant then one could expect that insights into behavioral finance impact one’s own behavior. If, however, learning mechanisms are weak in this respect the insights into behavioral finance will have a minor impact on one’s own behavior. We provide a test of these competing views and find evidence in support of the latter hypothesis put forward by psychologists working in behavioral decision-making and more recently by behavioral economists.8 Our research aims for extending literature in psychology which has clearly revealed the “bias blind spot” (Pronin et al., 2002), i.e. the belief that one’s own 7 I would like to thank my co-author Lukas Menkhoff. This paper was originally publis-...

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