Rationality of the Portfolio Investor: Behavioural Features of Formation of Expectations

Yury V. Eltsov ()
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Yury V. Eltsov: National Research University Higher School of Economics, Moscow 119571, Russia

Finansovyj žhurnal — Financial Journal, 2013, issue 1, 81-94

Abstract: We provide the results of massive field experiments aimed at identifying the mechanisms of investors’ decision making. We explore the way rational subjective expectations are translated into asymmetric distributed rates of return. Special emphasis is placed upon behavioural phenomena such as over- and underreaction, narrow framing, and bounded rationality. The mathematical model of investors’ expectations extrapolation based on Gram — Charlier expansion is suggested and proved empirically by retrospective investment strategies testing.

Keywords: behavioural finance; decision making; pricing process modeling; bounded rationality; overreaction; underreaction; narrow framing (search for similar items in EconPapers)
JEL-codes: D81 E22 O16 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:130110:p:81-94

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