A Crisis of Beliefs: Investor Psychology and Financial Fragility (original) (raw)
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https://www.ijrrjournal.com/IJRR\_Vol.9\_Issue.10\_Oct2022/IJRR-Abstract55.html, 2022
The goal of the research questions is analysing empirically if there is any irrational behaviour in decision-making and if human behaviour is not always rational using not consistent logic in problem solving or decision-making. The researcher will analysis the behaviour of the investor during bearish and bullish market to find behaviour inconsistency, that according to the researcher, could be due to the asymmetric anchor effect, asymmetric herd behaviour, asymmetric disposition effect and asymmetric, loss aversion, recency bias, frame bias.
The Rational-Behavioral Debate in Financial Economics
The contest between rational and behavioral finance is poorly understood as a contest over "testability" and "predictive success." In fact, neither rational nor behavioral finance offer much in the way of testable predictions of improving precision. Researchers in the rational paradigm seem to have abandoned testability and prediction in favor of a scheme of ex post "rationalizations" of observed price behavior. These rationalizations, however, have an unemphasized relevance for behavioral finance. While behavioral finance advocates may justly criticize rationalizations as unlikely to lead to a science of financial economics with improving predictive power, rational finance's explanatory power plays a key role supporting the limits of arbitrage arguments that make behavioral finance possible.
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DISCLAIMER: This Newsletter is provided solely for the information of members of the Stockbrokers Association. It does not constitute advice. The Stockbrokers Association nor any of its officers or agents accepts no liability or responsibility for the accuracy, reliability or completeness of any information contained in the Newsletter, and readers should rely on their own enquiries and analysis in making any decision or taking any action that affects them.
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The theory of rational investors has empirically proven not to be an accurate model for describing how investors in reality behave. However, there is a great number of finance theorists and orthodox economists that advocate the theory of homo oeconomicus. In this paper, we take a closer look at susceptibility of investors to heuristics and biases, in general, and looking at some individual differences with respect to committing to these biases. Individual differences include educational background, professional experience, and years of investing experience. We found that susceptibleness to heuristics and biases is present in majority hypothetical scenarios. With regard to individual differences, we found that educational background could play a role in susceptibleness to heuristics and biases.
Irrationalities in Investment Decisions: A Bibliometric Analysis
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Behavioural biases are a branch of behavioural finance which focuses on irrationalities in the decision-making of investors. The present study is a bibliometric analysis of the research in the area of "behavioural biases" to bring out the evolution, growth, major contributions, and trend topics in the field. Through bibliometric analysis, the study made a time-line based scientific mapping of publications in behavioural biases. Biblioshiny, a web interface tool in the bibliometrix R software package, is employed for mapping the literature. A total of 340 documents were extracted from the Web of Science database using the keyword "behavioural biases". The documents were refined using the PRISMA framework, and 172 of them were included in the study. The analysis shows that the first article on the topic was published in 1995 by Schweitzer, and the year in which the most articles were published was 2020. Alok Kumar, University of Texas, has made the highest contribution in the field. The United States is the leading contributor. 'Prospect theory' remains the most used keyword, and the thematic analysis reveals that 'investment' is the main theme around which more articles are written. The most globally cited article is Frank Zhang's 'Information Uncertainty and Analyst Forecast Behavior,' published in 2006. By analysing the results, it is evident that there is a wide scope for exploration into the various dimensions of behavioural finance. Prospective researchers can effectively utilise the gaps prevailing in the discipline of behavioural finance.
Psychology of investors: reexamination of the traditional finance
CERN European Organization for Nuclear Research - Zenodo, 2022
Traditional finance and behavioral finance are two branches of finance, dealing differently with the decision-making choices of stock brokers, whether on the financial markets or in the company of which they are shareholders. The traditional approach is based on the hypothesis of the efficiency of financial markets and the perfect rationality of the stock market, on the other hand, the behavioral one takes into consideration the impact of cognitive bias and emotional bias on the decision-making process. Rationality and irrationality are two explainable concepts of the decision-making of the drone operators. According to the traditional, stock brokers are "rational" since they allow the price of a share to be linked with its fundamental value and the cancellation of any divergence through arbitration. However, behaviorists describe drone operators as "irrational" because they are humans, driven by emotions and judgment heuristics that interfere with their rational behavior and investment decisions. The purpose of this article is first to clarify the basic foundations of each reasoning, so that we can know whether behavioral finance actually offers remedies for a good understanding of the behaviors of drones.
Behavioural Finance: A Study of behavioural biases
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It has been said that human being are rational they take Decision rationally after properly analyzing the information available to him but can you think abut it why people spend a lot of money on Lavish birthday party, wedding reception etc. could you think is it rational ? no These decisions are affected by their emotions these are illogical. Behavioural finance helps to attempt understanding this topic. Behavioural and finance are two Different things. Behaviour relates to the psychology and finance is all about numbers So this paper attempts to explain the relationship between these two terms. This paper explores the behavioural biases and impact of it on investment decision of investors during covid 19 behavioural Finance is not a new concept but it evolves due to the limitation of standard finance theory. This paper glimpse on the behavioural finance concept and its evolution.
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Mathematical algorithms often fail to identify in time when the international financial crises occur although, as the classical theory of choice would suggest, the economic agents are rational and the markets are or should be efficient and behave also rationally. This contribution tries to highlight some well-known limits of the classical theory of rational choice and compare this theory of choice with bounded rationality, which is a different notion of rationality, and with an approach that seeks to combine economics and psychology, based on experimental data, which established itself as behavioral economics. The work also examines part of the literature of behavioral finance which has given important contributions in explaining the behavior and the anomalies of financial markets. A final reference is dedicated to neuroeconomics that is gaining more and more ground in the analysis of economic behavior.