Face Nominal Effect on Capital Market Transactions. The Case of Poland
Face Nominal Effect on Capital Market Transactions. The Case of Poland

Author(s): Magdalena Jasiniak
Subject(s): National Economy, Behaviorism, Financial Markets, Socio-Economic Research
Published by: Masarykova univerzita nakladatelství
Keywords: face nominal effect; behavioral finance;
Summary/Abstract: Psychological features have an important role in evaluation processes. Studies indicate that investment decisions are strongly determined by behavioral factors. As a result investors behave irrationally. One of parameters that influence purchasing decision is price. Perceiving price as high generally discourage the purchase. As a consequence, goods at lower price are more attractive to bought what creates higher demand and influence companies’ revenues. Following paper analyze whether the face nominal effect observed at consumer market also occur in stock exchange market. The main aim of this article is to verify whether investors are influenced by face nominal values on stock market exchange. Author state that cheap assets characterized by nominally lower prices are more attractive to buy and bring higher profits (as a consequence of increased demand) in comparison to assets described as expensive. In order to verify the hypothesis, database of 13789 quotations from 1.07.1999 to 30.12.2013 was created. The sample was divided into three groups – cheap, average and expensive stocks. Finally the statistical analysis was conducted among 2924 records including only cheap and expensive units. Statistical analysis confirm that assets defined as “cheap” generate higher profits and lower losses.

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