Behavioral finance: new research trends, socionomics and investor emotions

Adrian Mitroi and Alexandru Oproiu
Additional contact information
Adrian Mitroi: Bucharest University of Economic Studies, Romania
Alexandru Oproiu: Bucharest University of Economic Studies, Romania

Theoretical and Applied Economics, 2014, vol. XXI, issue 4(593), 153-166

Abstract: The paper presents a critique of standard investment analysis, fundamental and technical, and develops an alternative more comprehensive approach that should include some of the tenets of behavioral finance. In the pursuit of understanding the behavior of the market player, the basic argument relies on the supposition that the risk appetite increases exactly at the worst moment - when the capacity to assume additional risk decreases significantly. People view a sample randomly drawn from a population as highly representative and quasi similar to the population in all its essential characteristics. They expect any two samples drawn from a particular population to be more similar to one another and to the population than is statistically justifiable. This behavior is different from the tenets of classic finance theory. The paper aims at demonstrating that investor psychological biases lead to investment performance to tilt to the mean in the long run and by following the trend, the financial market population does not enjoy significant sustainable benefits. As a reflection of the behavioral biases and influences, the statistical demonstration supports the conclusion that markets do not random walk.

Keywords: psychology; biases; efficiency; individual investment. (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://store.ectap.ro/articole/978.pdf (application/pdf)
http://www.ectap.ro/articol.php?id=978&rid=109 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:xxi:y:2014:i:4(593):p:153-166

Access Statistics for this article

Theoretical and Applied Economics is currently edited by Mircea Dinu

More articles in Theoretical and Applied Economics from Asociatia Generala a Economistilor din Romania / Editura Economica Contact information at EDIRC.
Bibliographic data for series maintained by Mircea Dinu ().