期刊名称：Journal of Economics, Finance and Administrative Science
印刷版ISSN：2077-1886
电子版ISSN：2218-0648
出版年度：2017
卷号：22
期号：43
页码：207-223
语种：English
出版社：Universidad ESAN
其他摘要：Purpose – People often face constraints such as a lack of time or information in taking decisions, which leads them to use heuristics. In these situations, fast and frugal rules may be useful for making adaptive decisions with fewer resources, even if it leads to suboptimal choices. When applied to fi nancial markets, the recognition heuristic predicts that investors acquire the stocks that they are aware of, thereby in fl ating the price of the most recognized stocks. This paper aims to study the pro fi tability against the market of the most recognized stocks in Europe. Design/methodology/approach – In this paper, the authors perform a survey and use Google Trends to study the pro fi tability against the market of the most recognized stocks in Europe. Findings – The authors conclude that a recognition heuristic portfolio yields poorer returns than a market portfolio. In contrast, from the data collected on Google Trends, weak evidence was found that strong increases in companies monthly search volumes may lead to abnormal returns in the following month. Research limitations/implications – The applied investment strategy does not account for transaction costs, which may jeopardize its pro fi tability given the fact that it is necessary to revise the portfolio on a monthly basis. Despite the results obtained, they are useful to understanding the performance of recognition heuristic strategies over a comprehensive time horizon, and it would be interesting to depict its viability during different market conditions. This analysis could provide additional information about a preferable scenario for employing our strategies and, ultimately, enhance the pro fi tability of recognition heuristic strategies. Practical implications – Through the exhaustive analysis performed here on the recognition heuristic in the European stock market, it is possible to conclude that no evidence was found for the viability of exploring this type of strategy. In fact, the investors would always gain better returns when adopting a passive investment strategy. Therefore, it would be wise to assume that the European market presents at least a degree of ef fi ciency where no investment would yield abnormal returns following the recognition heuristic. Originality/value – The main objective of this paper is to study the performance of the recognition heuristic in the fi nancial markets and to contribute to the knowledge in this fi eld. Although many authors have already studied this heuristic when applied to fi nancial markets, there is a lack of consensus in the literature. Paper type Research paper
