The paper “Behavioral Finance in the UK” discusses the regulatory framework, which relates to the different requirements for running the operations of the businesses as well as the further regulations for reporting the financial performance of the organization…
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The financial reporting standards perform the function of regulating the business world by laying down the accounting standards and procedures which the limited companies need to follow. This not only helps in getting the financial information about companies on a common base by having standardized policies but also serves the purpose of providing the users of financial statements with clear, accurate, reliable and relevant information (2005). In the United Kingdom, there are three basic elements of the regulatory framework for all the listed companies. The government has its role in regulating the businesses by way of the Company Law; the accounting professionals perform their duties by preparing, interpreting and implementing the accounting standards being prepared for the financial reporting purpose; and finally the stock exchange keeps a check by having various stock exchange rules for the companies listed on the London Stock Exchange. The Company Law is to be fulfilled by all the limited companies whether public or private, however, there are variations depending upon the nature of the entity. It’s the basic regulatory framework introduced by the government in order to keep a record of the companies in the country (Ray Ball, Lakshmanan Shivakumar, 2004). However, this Company Law does not pay much attention to imposing regulations for the standardization and consistency of the accounting standards and policies. It just lays down the general rules and requirements for preparing financial statements, their format, and their content. The procedure for finalizing the content is not discussed. The Company Law makes it mandatory that all the listed companies should prepare.
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...There are different techniques and valuation methods that investors use to estimate the price of the stock and then make their investment decision. Not all the techniques would give the same kind of results; however these techniques are helpful in giving a signal or a hint to the investors. Investors have different aspects and factors to consider while making the investment decision. Investors have different socio-economic background, qualification, believe, emotions. Moreover, differences in race and age of investors also influence the investment decision and therefore the decision of one investor could differ from other investor and this has been the main role of behaviorfinance i.e. to define and...
...?BEHAVIORALFINANCE PART Section A Behavioralfinance refers to the study of the influence of psychology on people in the financial sector and its perceived overall influence on financial markets. This in essence means it is a combination of finance and psychology to determine and explain how and why people tend to make illogical and inherent decisions when it comes down to saving, spending money. In investigating these unique phenomena, there arise two key challenges. One is whether the phenomenon exists at all in the first place and two, even if it did, will a radical paradigm shift in behavior be the proposed solution? Psychology...
Regulatory frameworks are at the heart of every system in the world in order to get it running in an organized way and yield the best possible results. In the corporate world, this regulatory framework relates to the different requirements for running the operations of the businesses as well as the further regulations for reporting the financial performance of the organization (Irene Henriques, Perry Sadorsky, 1999).
Financial reporting refers to the disclosure of the company’s financial and operational information in order to provide the users a clear and accurate picture of the actual performance and worth of the company (2005). Although every business is different...
...Efficacy of BehavioralFinance in Japan INTRODUCTION The efficient market hypothesis indicates that since market prices reflect all available information, containing information about the future, the only difference between the stock prices at time t and time t + 1 are phenomenon that can not possibly be predicted. Hence, in an efficient market, prices can be statistically tested and investigated for the random-walk hypothesis.
Fama (1991) describes market efficiency as:
A market in which firms can make production-investment decisions, and investors can choose among the securities that represents ownership of firms’ activities under the assumption that security prices at any time “fully reflect” all...
...Behavioral Learning s of Learning: s Behavioral Learning Researches indicate that there are still many cases of racial and ethnic hatred in schools. This trend is strongly believed to have been engendered by the student’s family and community. However, these racism and intolerance acts are subtle compared to how the situation was 20 years ago. Still resurgence cases of violence and overt racism are being witnessed and are manifested in form of prejudice and discrimination in schools. This poses a challenge to the school managements to come up with ways of ensuring that schools remain safe havens for children keeping them away from violence. Most schools have come up with different strategies in an effort...
...BehavioralFinance- Microeconomics Theories BehavioralFinance- Microeconomics Theories Absence of a body of positive micro economic theory relating to risk condition has beset those attempting to predict the behaviour of capital markets. Traditional models have given insights of investment considering certain conditions of certainty though many prefer the method of price behaviour.
Economics is a science due to the complications in the subject matter and complications, in the mechanism of prices and production.
There has been an analysis of the behaviour of individuals constituting the economic community to illustrate the development of economics.
Capital asset prices undergo description carefully, the individual preferences... level is...
...BehavioralFinance By 5th, September, Article Fractals and scaling in finance by Benoit Mandelbrot This book discusses the major contributions of finance, which helps readers to understand how speculative prices fluctuate in time. Mandelbrot (1997) is famous for his great thoughts of fractal and scaling in finance whereby he discusses the following subjects.
Financial and econometrics models
Applying the concept of scaling to data generated by financial analyses.
Highlighting risks in trading strategies.
Distribution of income.
Methods in statistical economics.
Proportional growth as well as other explanations of scaling.
1. Financial and...
...BehavioralFinance- FIN 645 QUESTION The following quotation appeared in the Fortune magazine “I have never asked to serve ona corporate board, never even hinted at wanting to be on one. And I have never asked to be on a compensation committee. I suspect that the reason I’ve been put on so many is that word gets around that I believe in paying people very, very well… I cannot sit and say to you what the right compensation number is. That’s the judgment call, the business judgment call. That’s what a board of directors does… What I know most of all is that when I see extraordinary effort and results out of a CEO, you can’t pay him enough.”
Evaluate the comments made by this particular director. Make sure...
...Behavioural Finance Evaluation of the Influence of Cognitive, Affective and Social Influences on Investment Decision Making
Possible Causes of Inaccurate Perceptions of Risk
Perception of risk is the conceptualisation of the expected risk that exists in making a certain investment by an investor. Investment decisions are normally influenced by psychological and sociological factors, leading to the creation of various biases in investment decisions. According to Nofsinger (2013), psychology affects investing. In terms of investment decision and portfolio management, it should be expected that cognitive, affective and social factors will have an influence on an investor. This influence is portrayed in terms of saving and...
...Beyond Greed and Fear: A Review of BehavioralFinance and its Aassumptions
Behavioralfinance is a new field that seeks to complement, rather than replace, conventional finance theory. Under the traditional view, participants in markets are rational. However, behavioralfinance disagrees with the assumption that individuals are fully rational, one hundred percent of the time. In cases where the rationality assumption fails, behavioralfinance is then used to identify where emotions and other cognitions have come to influence decisions, causing agents to behave in random ways. Hersh’s...
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