| Summary: | 碩士 === 國立政治大學 === 國際經營與貿易研究所 === 102 === Currently, much academic research is concerned about investor underreaction &; overreaction in behavioral finance. It mainly discusses the relationship between investment strategies and underreaction &; overreaction and whether investors have tendency to utilize investment anchor. This study determined to follow basis of Li and Yu（2012） in order to examine the existence of underreaction &; overreaction, investor limited attention and the tendency to set anchor in Taiwan stock market. We use nearness to the 52-week high and nearness to the historical high as proxies capturing the degree of investor underreaction and overreaction to news.
In this study, we adopt TAIEX as main data and run two different types of regression model based on weekly and monthly data. Except under normal condition, we further examine these two proxies with controlling business cycle and without Taiwan economic bubble. Finally, we compare the predictive ability to forecast future aggregate market returns among TAIEX, TW 50 and MSCI Taiwan index.
Our empirical results support the hypothesis 1, “nearness to the 52-week high positively predicts future market returns and nearness to the historical high negatively predicts future market returns” and hypothesis 2, “using index with higher visibility results in significantly predictive ability for nearness to the 52-week high and nearness to the historical high,” while MSCI Taiwan Index is the most significant. Besides, weekly regression is more suited to Taiwan stock market than monthly regression. These findings are consistent with the limited investor attention and anchoring research.
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