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  • Behavioral Finance

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    Vaishali Chouhan
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    Behavioral finance is the study of how psychology affects investors and financial markets. It focuses on why investors often act against their best interests and make decisions based on biases rather than facts. The objectives of behavioral finance are to study emerging issues in financial markets, understand investor psychology, and analyze changes in investment trends and decisions by developing strategies that account for cognitive biases.

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    Behavioral finance is the study of how psychology affects investors and financial markets. It focuses on why investors often act against their best interests and make decisions based on biases rather than facts. The objectives of behavioral finance are to study emerging issues in financial markets, understand investor psychology, and analyze changes in investment trends and decisions by developing strategies that account for cognitive biases.

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    8 views7 pages

    Behavioral Finance

    Uploaded by

    Vaishali Chouhan
    Behavioral finance is the study of how psychology affects investors and financial markets. It focuses on why investors often act against their best interests and make decisions based on biases rather than facts. The objectives of behavioral finance are to study emerging issues in financial markets, understand investor psychology, and analyze changes in investment trends and decisions by developing strategies that account for cognitive biases.

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    © All Rights Reserved
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    BEHAVIORAL FINANCE

    DEFINATION

    • Behavioral finance is the study of the effects of psychology on investors and


    financial markets
    • It focuses on explaining why investors often appear to lack self-control,
    act against their own best interest, and
    make decisions based on personal biases instead of facts
    BEHAVIORAL FINANCE BIASES

    • Self-attribution bias
    • Confirmation bias
    • Representative bias
    • Framing bias
    • Anchoring bias
    • Loss aversion
     OBJECTIVE OF BEHAVIOURAL FINANCE

    • To study emerging issues in financial market


    • To understand the psychology of the investors’
    • To study the change in trends in investment
    • To study the investment decision
    • Develop the strategy of financial decision
    • Study the scope of investment decision
    TRADITIONAL FINANCIAL BEHAVIORAL FINANCE
    THEORY THEORY
    • Both the market and investors are • Investors are treated as “normal”
    perfectly rational not “rational”
    • Investors truly care about • They actually have limits to their
    utilitarian characteristics self-control
    • Investors have perfect self-control • Investors are influenced by their
    • They are not confused by cognitive own biases
    errors or information processing • Investors make cognitive errors
    errors that can lead to wrong decisions

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