Analysis of the pricing behaviour of capital assets from a noise perspective

Document Type : Original Article

Authors
Mahdi Barasoud 1
gholam reza zomorodianS 2
Fraydoon Rahnamay Roodposhti 3
1 PhD in Finance - Department of Financial Engineering, Islamic Azad University, Science and Research Unit, Tehran, Iran
2 Professor and member of the academic staff of the Department of Business Administration, Islamic Azad University, Tehran Center, Tehran, Iran.
3 Full professor and faculty member, Department of Management and Accounting, Tehran Science and Research Unit, Islamic Azad University, Tehran, Iran
10.30495/jik.0621.23455
Abstract
The purpose of analyzing the pricing behavior of capital assets from the perspective of noise or human judgment is to investigate the impact of irrational factors on the pricing process. Decisions based on personal perception, level of knowledge, misunderstanding of market conditions, psychological approaches and risk tolerance can lead to disturbances in the pricing process. Noise has a negative impact on financial markets. Based on this, this study attempted to evaluate the presence of noise in stock price valuation. To this end, noise was measured for the time horizon 2024-2026 using a sample consisting of five financial experts and five selected companies. Based on the results obtained, the valuation noise in the research sample ranges from 12 to 61 percent. Furthermore, the results of the Mann-Whitney U test show that the effects of noise in stock valuation cause a significant difference in stock valuation. Accordingly, noise is caused by the unwanted variability of judgments and decisions and is present in a significant amount.
Keywords
Noise
Human judgments
Stock Price Valuation

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