Behavioural Finance Viev On Market Bubbles

Behavioural Finance Viev On Market Bubbles Essay example
Masters
Essay
Finance & Accounting
Pages 10 (2510 words)
Download 0
Name Institution Course Tutor Date Market Bubbles In financial and accounting practices, the terms market bubbles and behavioral view are not new since the introduction of rational expectations regarding economic models. A market bubble in economics refers to a sharp abnormal rise in the market price of a commodity or a set of commodities consistently, with the initial increase in the prices generating expectations on future rises, thus, attracting speculators whose interest lies in the trading profitability of such commodities rather than their earning capacity…

Introduction

This paper investigates these market events through relevant research material and identifies the anatomy and behavioral finance phenomena of the events using information. The tulip bulbs speculation, which was at its peak in February 1637, and the consequent market crash that followed mark the most notorious economic hard times in the History of Dutch (Goldgar, 2007:5). Together with Britain’s Sothern Sea Buble in the 18th century, these are the earliest example of irrational market behavior that affected investors in Europe. The Semper Augustus, a tulip bulb type, was both sublime and prosaic than any comparable bonds or stocks, it was extraordinarily beautiful with its pure white top and midnight petals combined with accents of crimsons flares. In history, it remains the most valuable flower to date. Back in the early 1624, an individual in Amsterdam in possession of the last dozen specimens of tulips was o be given a high of 3,000 guilders, an equivalent of a wealthy merchant’s annual income, but turned down the offer. This is the height of how speculations had raised the prices of the tulip. ...
Download paper
Not exactly what you need?

Related papers

Behavioural Finance Implications on Personal Investment Decisions
This calls for better understanding and insight of the nature of human in the current global outlook, plus advancement of fine skills and the capability to achieve the best from investments. Furthermore, investors need to develop foresight, positive vision, drive and perseverance (BAKER, & NOFSINGER, 2010: p23). Investors vary in all features due to factors such as demographic factors, which…
Development of Behavioural Finance
This was followed by Selden’s ground breaking work on the stock exchange where he attempted to explain people’s financial behaviour in the stock exchanges (Selden, 1912). Further work on behavourial finance continued through the efforts of psychologists such as Leon Festinger who introduced the concept of cognitive dissonance (Festinger et al., 1956). The more modern trends in behavourial…
Behavioural Finance
It is very clear that some of the participants in the market do not make rational decisions which translate to mistakes. However, astute market players get the chance to capitalize on such mistakes. For instance, a rational investor can take the decision to buy when there is market crash resulting from speculative behavior (Mussweiller & Schneller, 2003, p. 124). Given a risk-adjusted basis,…
Coursework Assignment BEHAVIOURAL FINANCE VIEW ON MARKET BUBBLES
During the period of tulip mania it has been observed that the cost of a single tulip had surpassed the average income of an expert employee. The period of tulip mania was considered to be a golden age in the Dutch calendar where the prices of the tulip bulbs reached to an unexpected extent (Thompson, 2006). Literature Review and Explanation of Tulip Mania (of the 17th century) At present time,…
Finance and Market , short essay question.
For the purpose of this study, we dwell on the advantages and disadvantages of the diversification of REITs holdings’ activities as opposed to the focused approach. Advantages Wider Market Cover When a REIT agency registers to venture into specific areas, there is an aspect of additional market cover. REIT can thus conduct a number of projects which essentially maximize its potential. This in…
Behavioural Finance
Adverse and extreme climatic conditions have increased in frequency and severity and adapting to these changes has now become a reality (Stiglitz, 2010, 19). Due to the rising population, the demand for natural resources has risen which has led to overexploitation of natural resources and degradation of the environment, food and oil prices have skyrocketed and debt crisis in most countries has…
BEHAVIOURAL FINANCE AND MARKET EFFICIENCY
Due to the presence of inefficiency within the global market, the sales and profitability of a company is not only affected but also the country’s ability to build a more reliable capital asset. 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…