Behavioral finance is an add-on paradigm of finance, which seeks to supplement the standard theories of finance by introducing Behavioral aspects to the decision- making process. Behavioral finance deals with Individuals and ways of gathering and using Information. Martin Swell Behavioral finance Is the study of the Influence of psychology on the Behavioral of financial practitioners and subsequent effect on markets. Anastasia Assassinations, Android Cataract’s, etc
In shiftiness’s (2001 ) terms, Behavioral Finance is the study of how psychology affects financial decision making and financial markets’ and, according to Taller (1993) it is ;simply ;open-mined’ finance’. Richard Taller, a founding father of Behavioral balance, captured the conflict in a memorable National Bureau of Economic Research (NEVER) conference remark to traditionalist Robert Barron: “The difference between us is that you assume people are as smart as you are, while I assume people are as dumb as I am. ” Market Hypothesis
According to Fame (1970), efficient markets are markets where “there are large numbers of rational profit maximizes actively competing, with each trying to predict future market values of individual securities, and where important current Information is almost freely available to all participants. ” In efficient market, on the average, competition will cause the full effects of new Information on intrinsic values to be reflected “Instantaneously” In actual prices. A market In which prices always “fully reflect” all available Information Is called efficient”.
The efficient market hypothesis In essence says that while an Investment manager cannot systematically generate returns above the expected risk adjusted return, stocks are priced fairly in an efficient market. The theory of the impact of human behavior on investing decision making emerged not as a supplementary assumption, but as a contradictory and sugarcoating approach. Behavioral finance deals with individuals and ways of gathering and using information. Behavioral finance is the study of the influence of psychology on the Behavioral of
In shiftiness’s (2001) terms, Behavioral Finance is the study of how psychology affects ‘simply ‘open-mined’ finance’. Richard Taller, a founding father of Behavioral finance, captured the conflict in a information is almost freely available to all participants. ” In efficient market, on the average, competition will cause the full effects of new information on intrinsic values to be reflected “instantaneously’ in actual prices. A market in which prices always “fully reflect” all available information is called The efficient market hypothesis in essence says that while an investment manager
