Review on Stock Market and Behavioural Finance - Research Paper Example

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 business people 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.... This research will begin with the statement that behavioral finance is the humanistic approach to financial decision making, where quite often the generally accepted rules of accounting, cash management, p/e ratios and other criteria used to make wise decisions often do not apply....

behavioural finance and Market Efficiency Total Number of Words: 2,998 1.... Introduction Since 1990s, the study of behavioural finance and market efficiency often goes hand in hand.... Therefore, in response to poor market efficiency, the study on behavioural finance has gained importance back in 1990s2.... Using knowledge on behavioural finance, the main causes and underlying drivers of the most recent global financial crisis will be identified and tackled in details....

hey point to stock market anomalies and other forms of market inefficiencies that allow investors to reap above-average returns.... hey point to stock market anomalies and other forms of market inefficiencies that allow investors to reap above-average returns.... Behavioral finance studies are also backed by empirical evidence, Fama's comments notwithstanding, that cite limits to arbitrage.... The fact that stocks and bonds are traded means that the psychological barriers that accompany behavioral finance theories of market behavior have to end at some point....

n the other side are the behavioral finance academics who claim that capital markets are inefficient, citing observable market anomalies showing that stock price behavior is predictable, that investors are irrational, and that many can earn above average returns or beat the market (Shiller 1981/1990/2000).... ehavioural finance studies are backed by empirical evidence showing market inefficiency caused by limits to arbitrage (Shleifer and Vishny 1997) and behavioral psychology, both individual (Shleifer 2000) and collective (Hirshleifer and Teoh 2003), as factors that explain inefficient market behaviour....

Human behaviour and personal investment decision making can influence the trading results of a stock market and therefore, it is relevant to discuss the role of behavioural finance in the investment decisions at the stock market.... Most of the theories and models have been developed by borrowing insights from other branches such as psychology, sociology, and other behavioural sciences to analyze the behavioural aspects of investors and its influence on stock market performance....

This paper called "behavioural finance" describes the world of the financial markets in detail.... 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....

The paper "Stock Market Efficiency and behavioural finance" is a good example of a literature review on finance and accounting.... The paper "Stock Market Efficiency and behavioural finance" is a good example of a literature review on finance and accounting.... he ideal model on finance, which underlies a significant number of alternate articles, is aimed to comprehend the structures of financial markets by using different models or frameworks assuming that the concerned operators behave with rationality....

The paper "stock market Efficiency: Meaning and Practical Implications" is a great example of a Finance & Accounting research paper.... The stock market facilitates the allocation of funds for investment in the economy and also helps in decision-making at the firm level through the placement of equity for prospective shareholders at the stock market.... The stock market is said to be efficient when the prices of securities fully reflect all the available information concerning the financial market....