Contents

First Executive Summary ................................................ ............................. A

Second Introduction ................................................. .................................................. 3
Third Theoretical foundations ................................................ ......................... 4
3.1. Integration of behavioral finance .............................................. .................. 4
3.1.1. Old Finance 5
3.1.2. Modern Finance ................................................ ............................................... 5
3.2. Behavioral Finance ................................................ ........................................ 7
3.2.1. Definition of behavioral finance ............................................... ............................ 8
3.2.2. Behaviorism and stimulus-response scheme ........................................... .. 8
3.2.3. Relevance
3.3. Recent developments in research ............................................. ....... 11
3.4. Basic Decision Theory ................................................ .............. 11
3.4.1. Mean-Variance Analysis .............................................. .................................... 12
3.4.2. Prospect Theory ................................................ .............................................. 13
3.5. Information processing and heuristics ............................................... .... 15
3.5.1. Heuristics to reduce complexity ............................................... ............. 16
3.5.2. Heuristics for rapid adjudication .............................................. ............ 18
3.5.3. Conclusion
3.6. Behavioral Biases ................................................ ........................................ 19
3.6.1. Information Processing Biases ............................................... ......................... 20
3.6.2. Decision Biases ................................................ ............................................... 23
3.6.3. Evaluation of Decision Biases ............................................... .............................. 25
3.6.4. Debiasing
3.7. Market anomalies ................................................. .......................................... 27

3.7.1. CAPM anomaly ................................................ .............................................. 27

3.7.2. Calendar anomaly ................................................. .......................................... 28
3.7.3. Boom and crash situations ............................................ ............................. 29
3.7.4. Interpretation of behavioral models and their limits .............................. 30
3.8. Mass psychological dynamics and herd behavior ...................................... 30
3.9. Rational and irrational behavior .............................................. ... 32
4th Behavioral aspects of technical analysis .................................... 35
4.1. Trend Analysis ............................................... .............................................. 36
4.1.1. Dow Technology
4.1.2. Charting ................................................. .................................................. .
4.1.3. Market Engineering
4.1.3.1. Trend-following indicators ................................................ ..................................... 39
4.1.3.2. Oscillating indicators ................................................ ....................................... 40
4.2. Cycle analysis ............................................... ............................................. 41
4.2.1. Elliott Wave Analysis ............................................. .......................................... 42
4.2.2. Time cycle analysis ............................................... ........................................... 45
4.3. Sentiment Analysis ............................................... ....................................... 48
4.4. Mathematical models ................................................ ............................... 50
4.5. Summary and critical evaluation .............................................. ....................... 52
5th Application of the theory ............................................... .......................... 54
5.1. Price to sales analysis ............................................. ..................................... 54
5.1.1. UBS
5.1.2. Adecco
5.1.3. Nestle
5.2. 72

5.2.1.
5.2.1.1. 75
5.2.1.2. Adecco 76
5.2.1.3. Nestle 77
5.2.2. Months anomaly ................................................. ............................................. 78
5.2.2.1. 78
5.2.2.2. Adecco 80
5.2.2.3. Nestle 81
5.2.3. Overall conclusions calendar anomalies and behavioral finance ................................. 83
5.2.3.1. Days anomaly 83
5.2.3.2. Months anomaly ................................................. .................................................. . 84
5.3. Analysis of other behavioral finance theories ........................................... 84
5.3.1. Prospect Theory ................................................ .............................................. 85
5.3.2. Heuristics
5.3.3. Behavioral Biases ................................................ ........................................... 87
5.3.4. CAPM anomaly ................................................ .............................................. 88
5.3.5. Boom and crash situations ............................................ 88 .............................
5.3.6. Herd instinct
6th Practical significance and forecasts .............................................. ......... 90
6.1. Practical benefits ................................................ ...................................... 90
6.1.1. Price to sales analysis ............................................. ......................................... 90
6.1.2. Calendar anomaly ................................................. ..........................................
6.2. Forecasts ................................................. .................................................. 92
6.2.1. UBS
6.2.1.1. Short-term 92

6.2.1.2. Long-term 93
6.2.2. Adecco
6.2.2.1. Short-term 94
6.2.2.2. Long-term 96
6.2.3. Nestle
6.2.3.1. Short-term 97
6.2.3.2. Long-term 98
7th Conclusion ................................................. .......................................... 100
8th Appendix ................................................. .................................................. 101
8.1. Bibliography ................................................. .................................. 101
8.1.1. Books 101
8.1.2. Journals ................................................. .......................................... 103
8.1.3. Sites 103
8.2. List of Figures ................................................. .............................. 105
8.3. List of Tables ................................................. .................................. 106
8.4. Declaration .................................................