Stock Price and Investment Decisions – Case of Warsaw Stock Exchange
Stock Price and Investment Decisions – Case of Warsaw Stock Exchange

Author(s): Magdalena Jasiniak
Subject(s): Business Economy / Management, Financial Markets, Accounting - Business Administration
Published by: Masarykova univerzita nakladatelství
Keywords: financial markets; behavioural finance; low price anomaly; investment decisions;
Summary/Abstract: The main aim of the paper is to verify whether the price is one of the determinants of the investment decisions. According to theory of market efficiency, stock price should not influence rate of investment return and investment decisions. However, investors who are influenced by behavioural biases show a greater tendency to invest in the low – priced stocks. This phenomenon occurs in particular among investors with less experience who are under the illusory impression that low – priced stocks will grow faster and will bring above – average profits. This has an impact on managerial decisions and the desire to keep the company’s stock prices at optimal price range (f.e. by dividing the shares) to ensure effective capital allocation and liquidity of the company’s stocks. Article presents the results of questionnaire study conducted among individual investors in Poland. The analysis is based on the logit model. The results of the proved that price does matter in investment decision process and influence the future profits.

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