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Author: Soumita De
Publisher:
ISBN:
Category :
Languages : en
Pages : 54
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Book Description
This study aims to investigate the impact of behavioral biases on the investor's financial decision making with special focus on three biases, namely confirmation bias, loss aversion and endowment bias. Investors are always assumed to be rational thinkers as per the traditional economic theories but the volatile market behavior has challenged the efficient market hypothesis. Behavioral finance is a newly developed approach in response to the difficulties faced by the traditional investors. Investment markets are becoming increasingly risky making the investors behave differently upon different market dynamic forces. Recent researches on individual investor's behavior have shown that people do not act rationally while making decisions, rather several factors influence their decisions whether it is related to stock market or personal financial investments. It is necessary to understand the major cause of irrationality in the markets. Empirical data has been collected through administrating a questionnaire and this data is used to investigate whether investors' decision making is affected by the three biases. The study with the help of graphical representation of the data and proportionality Chi square analysis (goodness of fit) using SPSS software concludes that the biases have a direct impact on the decisions taken by the investors. This paper attempts to have an insight about the key factors influencing the behavior of the investors with respect to the demographics in relation to the investments and their personal financial decision making process. The findings of this study will be useful for investors to understand the common behaviors, identify their reactions while taking decisions for better returns and take corrective measures to not fall into the trap of the behavioral bias. It is also helpful for the financial planners to device suitable asset allocation strategies for their clients.
Author: Soumita De
Publisher:
ISBN:
Category :
Languages : en
Pages : 54
Get Book Here
Book Description
This study aims to investigate the impact of behavioral biases on the investor's financial decision making with special focus on three biases, namely confirmation bias, loss aversion and endowment bias. Investors are always assumed to be rational thinkers as per the traditional economic theories but the volatile market behavior has challenged the efficient market hypothesis. Behavioral finance is a newly developed approach in response to the difficulties faced by the traditional investors. Investment markets are becoming increasingly risky making the investors behave differently upon different market dynamic forces. Recent researches on individual investor's behavior have shown that people do not act rationally while making decisions, rather several factors influence their decisions whether it is related to stock market or personal financial investments. It is necessary to understand the major cause of irrationality in the markets. Empirical data has been collected through administrating a questionnaire and this data is used to investigate whether investors' decision making is affected by the three biases. The study with the help of graphical representation of the data and proportionality Chi square analysis (goodness of fit) using SPSS software concludes that the biases have a direct impact on the decisions taken by the investors. This paper attempts to have an insight about the key factors influencing the behavior of the investors with respect to the demographics in relation to the investments and their personal financial decision making process. The findings of this study will be useful for investors to understand the common behaviors, identify their reactions while taking decisions for better returns and take corrective measures to not fall into the trap of the behavioral bias. It is also helpful for the financial planners to device suitable asset allocation strategies for their clients.
Author: Yamini Gupta
Publisher:
ISBN:
Category :
Languages : en
Pages : 9
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Book Description
Capital Asset Pricing Model, Efficient Market Hypothesis and Modern Portfolio Theory (Traditional Financial Theories) presumes that financial markets are perfect and all the investors behave rationally. In other words, these theories believe that whatever new information comes in the market, it is instantly absorbed by the stock prices; thus, eliminating the possibility of earning more profits just by having the company's insider information. But, there are many empirical studies done before which shows that investors while trading in stock market are not rational always, rather their decisions are affected by many other factors. Thus, the present paper focuses on determining the various behavioral biases that influence investor's decision making process. The data for the same was gathered from 380 respondents residing in Delhi/NCR to test the presence of Loss Aversion, Regret Aversion, Herd Behavior, Overconfidence Bias and Cognitive Dissonance Bias. Further, Principal Component Analysis was used to analyse the collected data. It was found that all these biases have moderate impact on the investor's decision making process. These findings shall help the investors in understanding the most common behavioral biases to which they are vulnerable to in order to help them to mitigate the risk factor in investment for better returns. It shall also help financial planners in customizing portfolios and asset allocation strategies for their clients.
Author: Dr Gayathri T
Publisher: Archers & Elevators Publishing House
ISBN: 9394958231
Category : Antiques & Collectibles
Languages : en
Pages : 154
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Book Description
Author: H. Kent Baker
Publisher: John Wiley & Sons
ISBN: 1118492986
Category : Business & Economics
Languages : en
Pages : 645
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Book Description
WINNER, Business: Personal Finance/Investing, 2015 USA Best Book Awards FINALIST, Business: Reference, 2015 USA Best Book Awards Investor Behavior provides readers with a comprehensive understanding and the latest research in the area of behavioral finance and investor decision making. Blending contributions from noted academics and experienced practitioners, this 30-chapter book will provide investment professionals with insights on how to understand and manage client behavior; a framework for interpreting financial market activity; and an in-depth understanding of this important new field of investment research. The book should also be of interest to academics, investors, and students. The book will cover the major principles of investor psychology, including heuristics, bounded rationality, regret theory, mental accounting, framing, prospect theory, and loss aversion. Specific sections of the book will delve into the role of personality traits, financial therapy, retirement planning, financial coaching, and emotions in investment decisions. Other topics covered include risk perception and tolerance, asset allocation decisions under inertia and inattention bias; evidenced based financial planning, motivation and satisfaction, behavioral investment management, and neurofinance. Contributions will delve into the behavioral underpinnings of various trading and investment topics including trader psychology, stock momentum, earnings surprises, and anomalies. The final chapters of the book examine new research on socially responsible investing, mutual funds, and real estate investing from a behavioral perspective. Empirical evidence and current literature about each type of investment issue are featured. Cited research studies are presented in a straightforward manner focusing on the comprehension of study findings, rather than on the details of mathematical frameworks.
Author: Priya Kansal
Publisher:
ISBN:
Category :
Languages : en
Pages : 12
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Book Description
There are number of studies which favor the existence of gender bias in investment patterns. Most of the studies conclude that women invest more conservatively than men (Yao, R. & Hanna, S.D., 2005) and that the women are more risk averse (Julie R. Agnew, 2005). Some studies also contend that women are less confident about their investment decisions and earn less return in compare to men (Barber B and Odean T., 2001). In this context, this paper aims to study whether these gender differences really exist in India. Using NCAER household survey report, the paper examined the household investing and saving patterns of Indian investors. The gender difference has been studied in terms of their risk tolerance viz their risk bearing capacity, risk perception i.e. how they assume risk within different constraints, time horizon for investment, preference for investment alternatives among the vast number of alternatives available in the Indian capital market etc. We also examined the factors which influence the investment behavior of women such as age, level of education, their marital status, income, dependency etc.
Author: Singh Shuchita & Bahi Shilpa
Publisher: Vikas Publishing House
ISBN: 9325984571
Category : Business & Economics
Languages : en
Pages : 261
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Book Description
The theories and concepts of behavioural finance are not widely studied. In many countries, the acceptance level of behavioural theories is quite low. However, the increasing instances of various anomalies of financial markets have forced many researchers to look closer to this modern field of finance. Behavioural Finance seeks to bring together all the concepts and theories developed by renowned international and national researchers and practitioners in financial markets. An in-depth study has been made to explain the current economic downturn and the role of behavioural finance in it. KEY FEATURES • Interviews: Latest industry views by various asset-class experts • Facts: Important factual information in boxes titled 'Do You Know?' • Abbreviations: Important and relevant abbreviated terms • Model Test Papers: For practice • Summary: Given as 'Key Learning Points' for revision
Author: Michael M. Pompian
Publisher: John Wiley & Sons
ISBN: 1118046315
Category : Business & Economics
Languages : en
Pages : 393
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Book Description
"Pompian is handing you the magic book, the one that reveals your behavioral flaws and shows you how to avoid them. The tricks to success are here. Read and do not stop until you are one of very few magicians." —Arnold S. Wood, President and Chief Executive Officer, Martingale Asset Management Fear and greed drive markets, as well as good and bad investment decision-making. In Behavioral Finance and Wealth Management, financial expert Michael Pompian shows you, whether you're an investor or a financial advisor, how to make better investment decisions by employing behavioral finance research. Pompian takes a practical approach to the science of behavioral finance and puts it to use in the real world. He reveals 20 of the most prominent individual investor biases and helps you properly modify your asset allocation decisions based on the latest research on behavioral anomalies of individual investors.
Author: Hersh Shefrin
Publisher: College Ie Overruns
ISBN: 9781259254864
Category : Corporations
Languages : en
Pages : 300
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Book Description
Author: Michael Pompian
Publisher: CFA Institute Research Foundation
ISBN: 193466782X
Category : Business & Economics
Languages : en
Pages : 58
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Book Description
This piece examines risk profiling through a behavioral finance lens. Behavioral finance attempts to understand and explain actual investor behavior, in contrast to theorizing about investor behavior. It differs from traditional (or standard) finance, which is based on assumptions of how investors and markets should behave. Much has been written about the tension that exists between the willingness to take risk and the ability to take risk. Risk appetite is the willingness to take risk and risk capacity is the ability to take risk. In the behavioral context, risk appetite and risk capacity are defined in terms of known risks and unknown risks. Irrational client behavior often occurs when a client experiences unknown risks. To aid in the advisory process, advisors can use Behavioral Investor Types to help make rapid yet insightful assessments of what type of investor they are dealing with before recommending an investment plan. With a better understanding of behavioral finance vis-à-vis risk taking, practitioners can enhance their understanding of client preferences and better inform their recommendations of investment strategies and products.
Author: H. Kent Baker
Publisher: John Wiley & Sons
ISBN: 0470769688
Category : Business & Economics
Languages : en
Pages : 1184
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Book Description
A definitive guide to the growing field of behavioral finance This reliable resource provides a comprehensive view of behavioral finance and its psychological foundations, as well as its applications to finance. Comprising contributed chapters written by distinguished authors from some of the most influential firms and universities in the world, Behavioral Finance provides a synthesis of the most essential elements of this discipline, including psychological concepts and behavioral biases, the behavioral aspects of asset pricing, asset allocation, and market prices, as well as investor behavior, corporate managerial behavior, and social influences. Uses a structured approach to put behavioral finance in perspective Relies on recent research findings to provide guidance through the maze of theories and concepts Discusses the impact of sub-optimal financial decisions on the efficiency of capital markets, personal wealth, and the performance of corporations Behavioral finance has quickly become part of mainstream finance. If you need to gain a better understanding of this topic, look no further than this book.
