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Behavioral Finance Theories and the Price Behavior of the ISE Around the Start of the Disinflation Programme

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  • Numan Ulku

Abstract

I present a detailed review of four recent behavioral theories to explain the pervasive evidence of under- and overreactions in financial markets. Then, I formally show that the price behavior of the Istanbul Stock Exchange (ISE) stocks around the commencement of the 2000-2003 disinflation programme is a good example of both under-, but especially of overreactions. Further analysis indicates that this price behavior fits interestingly well to (are explicable by) the predictions of these behavioral theories. Small investors would benefit a lot from the lessons of behavioral theories.

Suggested Citation

  • Numan Ulku, 2001. "Behavioral Finance Theories and the Price Behavior of the ISE Around the Start of the Disinflation Programme," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 5(17), pages 93-124.
    • Handle: RePEc:bor:iserev:v:5:y:2001:i:17:p:93-124
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    File URL: http://www.borsaistanbul.com/datum/imkbdergi/EN/ISE_Review_17.pdf
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    References listed on IDEAS

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    Cited by:

    1. Numan Ülkü, 2008. "Do Big Investors’ Trades Have Predictive Power? A Note on Istanbul Stock Market," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 2(1), pages 85-108.

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