tailieunhanh - CHAPTER TEN: BEHAVIORIAL FINANCE

Behavioral Finance, a study of investor market behavior that derives from psychological principles of decision making, to explain why people buy or sell the stocks they do. The linkage of behavioral cognitive psychology, which studies human decision making, and financial market economics. Behavioral Finance focuses upon how investors interpret and act on information to make informed investment decisions. Investors do not always behave in a rational, predictable and an unbiased manner indicated by the quantitative models. Behavioral finance places an emphasis upon investor behavior leading to various market anomalies | CHAPTER TEN BEHAVIORIAL FINANCE 06 08 2011 1 DEFINITIONS Behavioral Finance a study of investor market behavior that derives from psychological principles of decision making to explain why people buy or sell the stocks they do. The linkage of behavioral cognitive psychology which studies human decision making and financial market economics. Behavioral Finance focuses upon how investors interpret and act on information to make informed investment decisions. Investors do not always behave in a rational predictable and an unbiased manner indicated by the quantitative models. Behavioral finance places an emphasis upon investor behavior leading to various market anomalies. 06 08 2011 2 PROMISE Behavioral Finance promises to make economic models better at explaining systematic non-idiosyncratic investor decisions taking into consideration their emotions and cognitive errors and how these influence decision making. Behavioral Finance is not a branch of standard finance it is its replacement offering a better model of humanity. Create a long term advantage by understanding the role of investor psychology Human flaws pointed out by the analysis of investor psychology are consistent and predictable and that they offer investment opportunities. 06 08 2011