Adjustment speed of psychological anchors: a comparative study of the G7 and BRIC stock markets

This paper proposes a model to estimate the dynamic psychological anchor and adjustment speed of investors in stock markets. By employing covariate-dependent threshold settings in regression kink models, we identify the changing psychological anchor and how quickly investors adapt to a target level. Analysing stock index data from the G7 and BRIC countries, we find evidence of time-varying psychological anchors in most BRIC countries. Additionally, our results indicate that the BRIC countries exhibit slower adjustment to target anchors compared to the G7 countries.