Contemporary Developments in Behavioral Finance

Mydhili Virigineni and M. Bhaskara Rao
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Mydhili Virigineni: KL University, Guntur, Andhra Pradesh, India
M. Bhaskara Rao: ICFAI Business School, The ICFAI Foundation for Higher Education, Rangareddy, Telangana, India.

International Journal of Economics and Financial Issues, 2017, vol. 7, issue 1, 448-459

Abstract: Investors need not be rational for markets to be efficient. The axiom of efficient market hypothesis that it is not possible to earn excess profits because the available information gets factored in instantaneously fell flat due to influence of human behavior on the investment process. Exuberance of investors escalates asset values unduly on the back of financial irrationality. The intersection of human behavior and the investment decisions has since evolved as behavioral finance. Research demonstrates that investment decision-making process is more human than analytical, owing to behavioral biases. Recent studies in prospect theory and heuristic decision-making process focused more on investor behavior causing market anomalies. At a time when irrational behavior is demonstrated not only in security markets but also in other markets such as property, bullion and commodities, this paper explores the contemporary research in behavioral finance.

Keywords: Behavioral Finance; Capital Market; Financial Irrationality; Irrational Behavior (search for similar items in EconPapers)
JEL-codes: M10 M20 M50 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2017-01-58

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