BEHAVIORAL FINANCE AS AN ORGANIZATIONAL BEHAVIOR CHALLENGE (original) (raw)

The Allusions of Behavioral Finance

The deliberation in theoretical finance among the Efficient Market Hypothesis (EMH) and the subject of the behavioral finance is of immense interest. from the time when its emerge, the EMH has been the most significant theory which describes the behavior of the diverse agents in the financial markets and overlooks more or less any prospective impact of human behavior in the investment method. From the end of 1970s and the commencement of 1980s, a rising number of researchers and scholars showed the irregularity of this theory. The anomalies of the recent portfolio models and theories have provoked the development of behavioral finance. Behavioral finance assimilates psychology and economics in finance theory and has its heredity in theground-breaking work of great psychologists Tversky and Daniel Kahneman (1979). The rationale of this study is to present a synthesis of the behavioral finance literature over the last two decades.

Two essays on behavioral finance

2013

TWO ESSAYS ON BEHAVIORAL FINANCE Quang Viet Vu Old Dominion University, 2012 Director: Dr. Kenneth Yung The first essay is entitled: "CEO Overconfidence, Corporate Governance Practices and Firm Innovation". In this study, I examine if overconfident CEOs overinvest or underinvest in innovative projects. I also investigate if overconfident CEOs pursue innovative projects to benefit personal interests or the interest of shareholders. By focusing on the effect of corporate governance in monitoring the behavior of overconfident CEOs, my results show that there is a negative relation between CEO overconfidence and firm innovation among firms with poor governance. In these cases, the finding is consistent with the implication that overconfident CEO are entrenched and invest inadequately in innovative projects when the firm has poor corporate governance. My results also show that for wellgovernanced firms, the overconfident CEOs do not overinvest because good risky projects are ac...

Behavioral Finance vs. Traditional Finance

Behavioral Finance and Decision-Making Models, 2019

This chapter explored the development of behavioral finance theories from the traditional finance theories in detail. Traditional financial theory has assumed that investors are perfectly well-informed in making financial decisions for many years. However, the reality shows that these assumptions are not valid, especially over the last two decades. It is observed that investors exhibit irrational behaviors by acting with emotions even if they are well-informed. Because of the awareness of the importance human psychology in investment decisions, behavioral researchers have advanced their research in this direction. Thus, behavioral finance theories have been developed with this in mind.

Behavioral Finance in Theory and Practice

Global Strategies in Banking and Finance

Behavioral finance is a new approach in finance literature. The main idea is that investors are not as rational as they are assumed to be. Therefore, financial markets could be better understood by using models that capture the effects of both rational and irrational investors. The critics of behavioral finance could be grouped into two main categories: limits of arbitrage and psychological factors. This chapter concentrates on both challenges and possible contributions of behavioral finance theory to the modern finance theory, which is mainly based on rational expectations theory and efficient market hypothesis.

Chapter 17 Behavioral Finance in Theory and Practice

2019

Behavioral finance is a new approach in finance literature. The main idea is that investors are not as rational as they are assumed to be. Therefore, financial markets could be better understood by using models that capture the effects of both rational and irrational investors. The critics of behavioral finance could be grouped into two main categories: limits of arbitrage and psychological factors. This chapter concentrates on both challenges and possible contributions of behavioral finance theory to the modern finance theory, which is mainly based on rational expectations theory and efficient market hypothesis.

Evolutions and Challenges of Behavioral Finance

2015

This article presents the evolution of behavioral finance, which is a new approach in capital market. This study reveals the effect of psychological factors in investment decision making process, which was a strong contradiction to the Efficient Market Hypothesis. Behavioral finance is not a replacement to the classical finance paradigm, but an alternative solution to explain the market inefficiency and the irrational behavior of investor.