StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Nobody downloaded yet

Behavioural Finance - Term Paper Example

Comments (0) Cite this document
Summary
This paper called "Behavioural Finance" describes the world of the financial markets in detail. The author takes into account various psychological factors of individual investors, rules of accounting, cash management, the best strategies…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.6% of users find it useful
Behavioural Finance
Read TextPreview

Extract of sample "Behavioural Finance"

Download file to see previous pages However, while these retreats from rationality may seem chaotic and random to the savvy investor, the application of psychology to finance may help to not only explain, but also predict this seemingly haphazard behavior.
Therefore, stated a bit more succinctly, behavioral finance examines how the human-animal reacts in a financial system theoretically devoid of any emotions. This has been referred to in the past as ‘open-minded finance’ (Thaler 1993) which is a generous expression implying that many investors often behave in a quite contradictory manner to the advice given them by their financial advisors. ‘Proponents of behavioral finance contend that people may not always be “rational,” but they are always “human.” Thus, behavioral finance exposes the irrationality of investors in general and shows human fallibility in competitive markets.’ (Baker and Nofsinger 2002: 99)
To many, the idea of market efficiency itself goes out of the window when the concept of human behavioral finance comes in. The argument is stated that the market is in reality not efficient, to begin with since the majority of personal investors operate in a mostly unpredictable fashion which by most standards is considered irrational. This conundrum gave rise to the research that became behavioral finance, which emphasizes the impact of investor behavior on the market and the seeming problems it can create towards market efficiency or lack thereof. (Gaffikin 2007)
The experience of the stock market bubble has given impetus to the theory of behavioral finance, which places greater emphasis on human motivation and market inefficiency. Yet investment bankers and businesspeople appear to put ever greater faith in the verdict of the stock market when making judgments that can have a big impact on output and employment. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Behavioural Finance Term Paper Example | Topics and Well Written Essays - 1500 words - 1, n.d.)
Behavioural Finance Term Paper Example | Topics and Well Written Essays - 1500 words - 1. https://studentshare.org/finance-accounting/1748717-financial-service
(Behavioural Finance Term Paper Example | Topics and Well Written Essays - 1500 Words - 1)
Behavioural Finance Term Paper Example | Topics and Well Written Essays - 1500 Words - 1. https://studentshare.org/finance-accounting/1748717-financial-service.
“Behavioural Finance Term Paper Example | Topics and Well Written Essays - 1500 Words - 1”. https://studentshare.org/finance-accounting/1748717-financial-service.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Behavioural Finance

Behavioural Finance

... that are involved in these decisions. However, while these retreats from rationality may seem chaotic and random to the savvy investor, the application of psychology to finance may help to not only explain, but also predict this seemingly haphazard behaviour. Therefore, stated a bit more succinctly, behavioural finance examines how the human animal reacts in a financial system theoretically devoid of any emotions. This has been referred to in the past as ‘open-minded finance’ (Thaler 1993) which is a generous expression implying that many investors often behave in a quite contradictory manner to the advice given them by their financial advisors. ‘Proponents of behavioural finance contend that people may not always be “rational...
7 Pages(1750 words)Essay

Development of Behavioural Finance

... choices which lead to poor financial decision making (Kahneman & Diener, 2003). The bounded rationality projections in behavioural finance project that individuals act to maximise satisfaction rather than utility through their financial decision making even though it may lead to a loss (Gigerenzer & Selten, 2002) (Tsang, 2008). Over the years, various kinds of psychological traits like projection bias, overconfidence, limited attention and the like have been used in behavioural finance models. The domain of inter-temporal choice has also had various applications of behavioural finance which tend to use various kinds of psychological factors to explain basic models of rational choice. Active Portfolio Management versus Passive Portfolio...
5 Pages(1250 words)Essay

Behavioural Finance in Business

...Behavioural Finance Introduction At the turn of the 20th century, traditional business practices underwent tremendous changes, and subsequently a new era of business emerged. Today, organisations are becoming increasingly competitive mainly due to the rush of new entrants. Hence, organisations consider employee productivity tactics as the key strategy to enhance the overall organisational performance. In order to promote this objective, today organisations widely use a new technique called employee surveillance. To define, employee surveillance or employee monitoring “is the act of recording or observing the actions of employees while on the job.” (Pinard & Romer 2011, p.220). Tapping telephone calls, monitoring computer and internet...
7 Pages(1750 words)Essay

Behavioural Finance final

...? Behavioural Finance final Table of Contents Introduction 3 Relation of economic crisis with public sector 3 Effective theories of public policy 4 Modern Monetary Theory 4 Mosler’s Law 5 Reverse Ricardian Equivalence 5 Role of public policy to counter crisis 6 Reference 8 Introduction This paper deals with one of the major areas of behavioural finance. Objective of this study is to assess the role of public policy to address financial crisis in the economy. This is one important areas of macroeconomic perspective. There are numbers of theories, approaches and models have been developed by the empirical researchers of different field to counter economic crisis. Different ways of reforms of financial crisis have been developed. Therefore...
5 Pages(1250 words)Essay

Behavioural Finance

...?Topic: Behavioural Finance Many studies in the area of behavioural finance suggest that individual investors make systematic errors due to behavioural biases. Do you believe that more sophisticated investors (e.g. equity fund managers) can capitalize on such individual investors’ errors and consistently outperform the market on a risk-adjusted basis? Why? Financial markets are very competitive and research studies note that there are little or no externalities from those participating in the market. Given such conditions, a rational investor has high chances of recording collectively efficient outcomes from investment decisions. It is very clear that some of the participants in the market do not make rational decisions which translate...
3 Pages(750 words)Essay

Behavioural Finance

...? Behavioural Finance The world has for a long time been in need of a change in the way things are done, the people recognise that the social, political and economic conditions in the universe are not in line with the needs of the society. Technological advancements have been the constantly changing since 1900’s with people being able to communicate and transact on a global scale and the middle class rising faster than ever before. However, despite these advancements, the disparity gap between the wealthy and the financially deprived people has been rising, both in nation-to-nation comparison and within the countries (Leunig, 2011, 16). Adverse and extreme climatic conditions have increased in frequency and severity and adapting... Behavioural...
14 Pages(3500 words)Essay

Behavioural finance

... 4TH March Behavioral finance The current competitive business arena has forced many local and international companies to undertake extensive research with an aim of expanding their investment portfolio as well as face off their competitors. In their efforts to determine the occurrence of a certain event, statisticians rely on heuristic principles. Tversky and Kahneman 1125, argue that heuristic principles are significant especially in simplifying the wide range of tasks that are associated with prediction of occurrence of events. However, these principles sometimes lead to errors that effect the final decision of statisticians thus affecting the overall decision making process in an organization. It is imperative to note that the mistakes...
10 Pages(2500 words)Research Paper

Behavioural Finance

... Task: Behavioral Finance Introduction The concept of behavioral finance is well handled by Mr. Montier who provides prolongedarguments in support of his suggestions that are mostly consistent with facts, figures and historical proofs. This clearly implies that Mr. Montier carried out a methodical research before he came up with these opinions. Since he provides facts, figures and historical prove of thorough research, this context seeks to support his opinions by providing a strong and convincing argument as to why it supports his opinions (Harper 19). Therefore, the ultimate aim of this context is to examine each of Mr. Montier’s articles and assess them one by one by providing supportive argument. Of Typewriters and Benchmarks Under...
15 Pages(3750 words)Research Paper

Behavioural Finance topic 8

...-of-equation models, and other was neoclassical approach that came with the modelled environments with rational maximization of individuals and firms. The neoclassical approach became an authority in public finance, international trade, and growth theory. Lucas (1977) defined business cycle regularities as, "comovements of the deviations from trend in different aggregative time series" and business cycle as, "movements about trend in gross national product". Another important advancement was recursive competitive equilibrium theory that can study the abstractions of the aggregate economy in which optimizing economic behaviour generates behavioural relations as low-order stochastic difference equations. Modern Business Cycle Theory...
4 Pages(1000 words)Essay

BEHAVIOURAL FINANCE

...Behavioural finance Table of Contents 3 Introduction 4 Inclusion criteria 4 Exclusion criteria 5 Literature Review 5 Different views of the researchers 6 Conclusion 11 Reference List 12 Abstract The literature emphasises on the need for a new economic paradigm. Economic paradigm is required for facilitating development of the global economy. This need is realised by every country around the world, but the government and higher authorities are reluctant to fulfil the same as it entails a huge investment. Hence, it is not plausible for the poor countries to incorporate and encourage the change. The environmental changes are frequent and unavoidable, but economic model change is rare and difficult to attain for any economy. Many scholars have...
12 Pages(3000 words)Literature review
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Term Paper on topic Behavioural Finance for FREE!

Contact Us