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The effect of the recent financial crises on the UK investors psyche?
Finance & Accounting
Pages 9 (2259 words)
The effect of the recent financial crises on the UK investors psyche? Objective To examine the effect of UK investors purchasing power and explore how the individual investors behaviour has transformed post 2007/08 financial crisis. Abstract The paper examines the effect of the recent stock market crash of 2007 among individual investors in UK.
Theories are provided to guide the behaviours and investment strategies of the investors. The theories give emphasis on the psyche of the investors and their way of thinking and reacting to the financial market changes. The individual decisions are cognitive while investments are made. The paper also highlights on the risk measurement capacity of the investors. The risk is associated with the changes that are brought in the stock prices by the companies during the crisis period. Key Words: financial behaviour, financial crisis, Investment psyche, decision making Critical Review (Background) It is quite understandable when people ask how the crises could have happened after the disaster had struck, but given that market players are irrational, it can be said that people, including experts and laymen alike, play a psychological role in financial decision making. According to Sahi and Arora (2012) it is hardly ever heard that investors make wrong decisions who buy when they have to sell and vice-versa, despite possessing the correct information. This is in complete non-conformity with the efficient market hypothesis theory, which states that people behave rationally and maximize their utility by accurately processing all the available information. ...
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