Unmasking the Grey Swan : Investor Biases in Times of Turbulence

Authors

  •   Safeeda K. A. Research Scholar (Corresponding Author), PG & Research Department of Commerce & Management Studies, St. Mary’s College, Sulthan Bathery, Wayanad - 673 592, Kerala
  •   Ganesh R. Assistant Professor, PG & Research Department of Commerce & Management Studies, St. Mary’s College, Sulthan Bathery, Wayanad - 673 592, Kerala

DOI:

https://doi.org/10.17010/ijf/2024/v18i10/174614

Keywords:

loss aversion bias

, disposition effect, grey swan, white swan, COVID-19, winning stocks, declining stocks.

JEL Classification Codes

, G11, G14, G41

Paper Submission Date

, September 20, 2023, Paper sent back for Revision, May 2, 2024, Paper Acceptance Date, May 28, Paper Published Online, October 15, 2024

Abstract

Objective : This study examined the disposition effect in the Indian stock market during the steady “white swan†and uncertain “grey swan†phases induced by COVID-19 to analyze the variations in investor biases influenced by market conditions. This study also tested the capacity of two techniques to elucidate the disposition effect during these periods.

Methodology : The disposition effect among the constituent stocks of the Nifty50 index was examined during the white swan (Jan 2019–Dec 2019) and grey swan (Jan 2020–Dec 2021) phases using the security vector autoregression (SVAR) model and a regression model.

Findings : The study emphasized the impact of uncertainty on the prejudices of investors in the Indian stock market. The uncertainty and dread of the market during the grey swan phase affected equities more than it did during the white swan period. The regression model proved ineffectual in identifying the disposition effect, but SVAR indicated the existence of bias.

Practical Implications : Market participants and regulators could create robust investment strategies and manage uncertainty by having a thorough understanding of the disposition impact and its variations. It also provided academics with important insights into the efficacy of various methods for tracking the disposition effects.

Originality : The disposition effect was compared in the white and grey swan phases in this study. Using different methodologies yielded unique insights into the effectiveness of different ways of tracking the disposition impact.

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Published

2024-10-15

How to Cite

K. A., S., & R., G. (2024). Unmasking the Grey Swan : Investor Biases in Times of Turbulence. Indian Journal of Finance, 18(10), 56–72. https://doi.org/10.17010/ijf/2024/v18i10/174614

Issue

Volume 18, Issue 10, October 2024

Section

Articles
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