Personal routes into behavioural finance (original) (raw)
Related papers
Procedia Computer Science
The present study chalks the developments in behavioural finance through the course of financial history. It provides the earliest evidences of behavioural anomalies reported by researchers in the stock markets. It starts the discussion with traditional finance followed by the analysis of traditional theories in situations where they are deemed insufficient. The paper then throws light on the significance of behavioural finance and its unique position in bridging the gaps between real life situations and traditional theories.
Behavioural Finance -A study on its Bases and Paradigms
INTERNATIONAL JOURNAL OF SCIENTIFIC RESEARCH AND MANAGEMENT, 2022
Traditionally rational models have been chosen in the field of economics and finance. Experimental psychology has provided the behavioural insights in finance and economics. Behavioural finance is a new field which explains the economic decisions of people. It is a field which combines behavioural and cognitive psychological theories with conventional economics and Finance. In this paper efforts have been made to provide a framework for the concept related to the behavioural finance. Review of literature is carried out so that different dimensions and views regarding behavioural finance can be understood. Theories, models and studies which try to complement behavioural finance studies are also discussed. New frontiers and approaches that can be adopted for further studies are discussed and it may help to provide a conceptual framework for future studies.
Purpose -The purpose of this paper is to introduce the special issue of Review of Behavioural Finance entitled "Behavioural finance: the role of psychological factors in financial decisions". Design/methodology/approach -The authors present a brief outline of the origins of behavioural economics; discuss the role that experimental and survey methods play in the study of financial behaviour; summarise the contributions made by the papers in the issue and consider their implications; and assess why research in behavioural finance is important for finance researchers and practitioners. Findings -The primary input to behavioural finance has been from experimental psychology. Methods developed within sociology such as surveys, interviews, participant observation, focus groups have not had the same degree of influence. Typically, these methods are even more expensive than experimental ones and so costs of using them may be one reason for their lack of impact. However, it is also possible that the training of finance academics leads them to prefer methodologies that permit greater control and a clearer causal interpretation. Originality/value -The paper shows that interdisciplinary research is becoming more widespread and it is likely that greater collaboration between finance and sociology will develop in the future.
Behavioural Finance – a Review Paper
PARIPEX INDIAN JOURNAL OF RESEARCH, 2022
The current research examines the evolution of behavioural finance over the span of financial history. It contains the earliest records of stock market behaviour oddities recorded by researchers. Traditional finance is discussed first, followed by an examination of traditional ideas in instances when they are judged inadequate.The study then discusses the importance of behavioural finance and its key role in creating a connection between real-world scenarios and classical assumptions.
Behavioural Finance: The Emergence and Development Trends
Procedia - Social and Behavioral Sciences, 2013
Global financial markets are influenced by many factors: the economic processes which take place in the country and the world, institutional and political constraints, information dissemination and accessibility, and so on. However, one of the most important factors is the people's reaction and perception. For each investor, regardless of financial instruments, business is a constant decision-making process. The article aims to analyse the research of non-professional investors' financial behaviour in a historical-theoretical perspective. This article reveals the aims of recognition and emotional factors on market movements focusing on a limited number of investor rationality and explains the psychological effects of investing activities. The methods of analysis and synthesis, description and comparison were applied in the article. Graphical visualization is used for demonstration of results.
Comprehensive Review of Literature on Behavioural Finance
2015
Investors are rational and that they consider all available information in portfolio investment decision process is the main assumption of standard finance and this holds true by Efficient Market Hypothesis (EMH), being an important theory of Standard finance. Over the years this assumption has been challenged by the psychologists and they argue that investors can’t be rational as their decisions are influenced by cognitive and psychological errors. The work done by the various prominent psychologists in this direction resulted in the development of a new branch of financial economics, known as Behavioural Finance. Behavioural finance considers how various psychological traits affect the way investors make their investment decisions. Against this backdrop, in present paper a modest attempt has been made to review various studies in this area so as to have clear understanding of the subject and to see how significant it is in financial decision making. From the review of literature i...
Behavioural finance: understanding impact of human behaviour towards financial decision making
International Journal of Economics and Accounting, 2022
The purpose of this research paper is to develop a conceptual framework and understanding of the field of behavioural finance. This paper puts forth theoretical aspects and practical implications of how human's behaviour affects a person's financial decision making. The research paper proposes a conceptual interrelation between finance, psychology, and sociology where the paper focuses on developing a certain factor which will help to deeply understand human's behaviour while making a financial decision (behavioural finance). Behavioural finance is one of the emerging areas of research in the field of finance. It focuses on the impact of human psychology and behaviour on financial decision making. So, it will be really interesting to find out the behavioural and emotional state factors that promote a human being to make a financial decision. This research paper is to find out the factors that promotes a human being to make the financial decisions which sometimes are not as per the financial theories.
2007
Behavioural finance is the study of the influence of psychology on the behaviour of financial practitioners and the subsequent effect on markets. Behavioural finance helps explain why and how markets might be inefficient. For more information on behavioural finance, see Sewell (2001).
Behavioural Finance: A Key to Sustain the Investment
international journal of research in computer application & management, 2019
The traditional structure of finance stresses the theories of modern portfolio theory and the efficient market hypothesis, the evolving field of behavioural finance investigates the psychological and sociological issues that impact the decision-making process. This paper will discuss some general principles of behavioural finance including omission bias, the utility of money, availability heuristic, framing, probability weighting. In conclusion, the paper will provide strategies to assist individuals to resolve these mental mistakes and errors by recommending some important investment strategies.
Behavioural Finance – a New Perspective
International Journal of Technical Research & Science, 2019
Behavioral theories are viewed as a relatively new phenomenon in the security markets. Therefore, examining the subject is essential in order to understand the changing world of investments. Current technology enhances fast trade between individual investors. The concept of investing is seen as trendy. Therefore, people tend to make illogical decisions not based on true knowledge or information of a certain investment object. These decisions are explained via several behavioral finance theories. The outcome of poor knowledge is that investors allow these theories to effect on their decision-making process, thus resulting in major losses. The behavioral models can affect on individuals' decision-making whether actual investments are conducted via professionals or not. The concept of investing is extensive as it can include all the aspects of pu rchasing items expected to gain more value in the future (art, antique, securities etc.). Therefore, it has been decided to narrow down the subject to concentrate on stock trading and the impact of behavioral finance on individual portfolio investors. This research paper attempts to highlight a new perspective on the study of behavioural finance. In this study, the aim is to establish the existence of such fundamental issues, driven by various psychological biases, in the investment decision-making process. Behavioral economists firmly believe that psychological factors influence investment decisions. They argue that today's investment decisions demand a better understanding of individual investors' behavioral biases. However, many economists believe complet ely in the application of traditional theories in the decision-making process and hence do not consider the concept of irrational behavior. Behavioral finance therefore studies the influence of psychology on the behavior of portfolio investors and their c onsequent reactions in stock market investing. In this context, it seems relevant to check whether the behavioral factors have an influence on the decision-making process of portfolio investors. A questionnaire will be formulated and distributed among the clients of two brokerage firms in India and their investment decisions and effects of behavioral factors on it will be studied. The focus is on individual investors as they are more likely to have limited knowledge about application of traditional theories in decision-making and hence are prone to making psychological mistakes. The primary analysis would be focused on determining whether behavioral factors affect the investors' decision to buy sell or hold stocks.