Behavioural Finance - Essay Example

Extract of sample
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, rational investors can beat market performance in a consistent manner. According to the perfect market hypothesis, prices reflect the full information about the market. This has the implication that an investor cannot beat the market unless he or she has inside information. A number of indices have been created with the aim of mimicking market performance. Research studies indicate that index funds account for almost 10 percent of the U.S. stock market capitalization and 60 percent of the money flowing into mutual funds. Despite the increasing euphoria towards passive management, there is active management which has enabled investors beat market bearing returns. Behavioral finance insists that investors are irrational in their decisions and that it is easy to partly predict future performance of stocks using their past performance. ...Show more

Summary

Topic: Behavioural Finance Name Professor Institution Course Date Many studies in the area of behavioural finance suggest that individual investors make systematic errors due to behavioural biases. Do you believe that more sophisticated investors (e.g. equity fund managers) can capitalize on such individual investors’ errors and consistently outperform the market on a risk-adjusted basis?…
Author : russellinnie
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Behavioural Finance"
with a personal 20% discount.
Grab the best paper

Related Essays

Behavioural Finance Viev On Market Bubbles
In the past, there have been several market bubbles followed subsequently by market crashes, some of which include the Tulip mania in the 17th century, the great market crash of 1929, the dot com mania of the late 1990s, and the recent sub-prime mortgages and the Collateral Debt Obligations crisis.
10 pages (2500 words) Essay
MBA module-International business environmnet
Most contemporary business organisations maintain a ‘website’ for conducting business which includes marketing efforts, apart from their ‘physical’ operations like shops, stores etc, whilst many others operate solely through the internet. In this essay, an integrative study will be done on the role of the internet in contemporary businesses, and how, this technology has penetrated both organisational and social cultures in developed countries as opposed to its limited recognition and usage in underdeveloped and developing nations.
12 pages (3000 words) Coursework
Efficient Markets Theory and Behavioral Finance
In the light of the 2007 to 2010 financial crisis, the efficient market theory can be based on the market dealings of the subprime mortgage crisis. On the other hand, the behavioural finance theory is a theory that bases the market trends on thee psychology.
6 pages (1500 words) Essay
Behavioural Finance Implications on Personal Investment Decisions
The manager’s cognitive psychology arbitrates the investigation of the variables of the issue in which it occurs. Decision-making is described as the procedure of selecting an alternative from a set of alternative decisions. The managers are required to keep themselves aware of the multidimensional fields in order to achieve the desired results in the aggressive and dynamic business environment.
6 pages (1500 words) Essay
Development of Behavioural Finance
A range of differentiated factors as well as psychological issues are taken into account in order to explain people’s financial habits. The evolution of behavioural finance can be traced back to Gustave le Bon’s The Crowd: A Study of the Popular Mind (1896).
5 pages (1250 words) Essay
Coursework Assignment BEHAVIOURAL FINANCE VIEW ON MARKET BUBBLES
rences 9 Overview of Tulip mania (of the 17th century) Tulip mania of Holland is considered as one of the most important events in the history of market uncertainty which had occurred during 17th century. Tulip mania was the first major economic bubble faced by the global investors where the costs of tulips had increased to an unprecedented level.
4 pages (1000 words) Essay
Behavioural Finance
The author gives a holistic approach to the issue of happiness. He states that happiness has at least three meanings: happiness as a mood; happiness as satisfaction with one’s life and happiness as a thriving and satisfying life that has an impact on humanity. These classes of happiness can be calculated by public policy and universal targets.
14 pages (3500 words) Essay
BEHAVIOURAL FINANCE AND MARKET EFFICIENCY
As a result of having poor market efficiency, a lot of global investors have become reluctant in investing their money on local and internal businesses. In general, the ability of each country to develop efficient market has something to do with the development of capital asset1.
12 pages (3000 words) Essay
Find out how much would it cost
to get a custom paper written by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT