Anish Dhakal

Roll Number: 19308

No system is perfect. There are always people who find loopholes in system, rules and

regulations to manipulate situations in their favour. Others suffer first due to the cunning

behaviour of such people and second due to their own ineffective decision making. The video to

be reviewed in our assignment is one such example.

It can be related to the concepts of Behavioural biases under the following points:

1. Herding Behaviour:

Herding behaviour refers to how individual decisions are influenced by group behaviour.

It stems from the observation that if a herd of animals starts moving in one direction, all

the animals want to follow the herd. In this movie clip, the leader of the herd appears to

be the guy named Prasad who is considered to be an expert on the matter of stock market

and in therefore followed blindly by the other people without doing proper research into

neither his expertise nor the ground reality of the PP Waterball company. Prasad can be

heard saying that PP Waterball Company is associated with a foreign company which led

others to blindly follow into showing their herding behaviour.

2. Mental Accounting

This can be explicitly seen in the case of the owner of the panipuri stall who went to the

CA. They were so excited when they heard that they could raise 1 crore that they just

jumped right into it without even caring much about how they would get that money, how

they would use it and if they are wise enough to handle that amount of money. They were

just too content with the idea of being able to raise that kind of huge amount.
 3. Overconfidence (Self-deception)

The concept of self-deception (overconfidence) is a limit to the way we learn. When we

mistakenly think we know more than we actually do, we tend to miss information that we

need to make an informed decision. This can be seen in the case of the herd leader Mr

Prasad who thinks just because the company is in collaboration with a foreign company

the price of the share will keep increasing i.e. go higher than Rs. 100 which wasn’t the

case. Also, others who followed Prasad also had too much confidence in him for so

evident reason except for the hype among other investors.

4. Greed

The biasness that comes with greed can easily be seen among all of the investors shown

in the video clip. The price of the share increased from Rs 22 to Rs 45 and again to above

90. Prasad kept saying it would go up further and people readily believed with because of

their greed to make more money.

Efficiency in the market

The movie clip destroys the theory of EMH (Efficient Market Hypothesis) entirely as there is no

reflection of the fair price of the stock in the market as it is manipulated to serve the needs of the

company owners.

Some of my observations regarding the technical efficiency are:

● It was very easy for one CA and a group of brokers to easily manipulate the news

reaching out to the market. No use of technology in the transactions.

 ● The problem of share brokers being the middlemen and holding sensitive information is a

result of paper-based transactions and the use of no technology except the telephone

which isn’t enough.

● The only source of information that investors had access to was the newspaper which

would show the price of the shares based on the closing price of the last day. Since the

share market tends to fluctuate a lot, this wouldn’t necessarily be enough information for

the investors to make a wise decision.

My observations regarding legal efficiency are:

● Lack of proper regulations with respect to IPOs that allowed the CA, the panipuri stall

owners and the brokers to commit fraud and get away with it.

● Failure of the government to identify and stop the fraud from happening. Lack of

corrective measure or penalties imposed by the government of the frauds.