Behavioural finance is the study of the influence of psychology on the behaviour of financial practitioners and the subsequent effect on markets.
‘The field of modern financial economics assumes that people behave with extreme rationality, but they do not. Furthermore, people’s deviations from rationality are often systematic. Behavioral finance relaxes the traditional assumptions of financial economics by incorporating these observable, systematic, and very human departures from rationality into standard models of financial markets. We highlight two common mistakes investors make: excessive trading and the tendency to disproportionately hold on to losing investments while selling winners. We argue that these systematic biases have their origins in human psychology. The tendency for human beings to be overconfident causes the first bias in investors, and the human desire to avoid regret prompts the second.’
Barber and Odean (1999)
Behavioral Finance Phd Thesis - .xyz
Key words: modern financial theory of behavioral finance for a standard financial, behavioral finance theory of the origin - Standard financial theory challenged since 1952 Markowitz portfolio theory put forward by modern financial theory to open first of its kind, M & M theory, capital asset pricing model (CAPM), the effective Capital Market Theory, Black-Scholes option pricing models such as the public house and laid a theoretical basis of standard financial theory. But another fundamental problem in finance - investors are not necessarily the actual decision-making process is the best decision - standard financial theories are powerless. 80 years of the 20th century, some non-efficient market prompted the new financial theory was invented mainly in the following areas: