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Contemporary Developments in Behavioral Finance

Author

Listed:
  • Mydhili Virigineni

    (KL University, Guntur, Andhra Pradesh, India)

  • M. Bhaskara Rao

    (ICFAI Business School, The ICFAI Foundation for Higher Education, Rangareddy, Telangana, India.)

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.

Suggested Citation

  • Mydhili Virigineni & M. Bhaskara Rao, 2017. "Contemporary Developments in Behavioral Finance," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 448-459.
    • Handle: RePEc:eco:journ1:2017-01-58
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    References listed on IDEAS

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    Cited by:

    1. Dian Primanita Oktasari & Nunu Nurjaya & Subur Karyatun, 2023. "Financial Literacy, Risk Perception, and Herding Effects on Investment Decisions," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(06), pages 22-29, June.
    2. Ali Shaddady & Mohammed Alsaggaf, 2020. "Issues that Matter When Behavioral Finance Factors Drive the Largest Initial Public Offering in the Saudi Financial Market," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 106-117.

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    More about this item

    Keywords

    Behavioral Finance; Capital Market; Financial Irrationality; Irrational Behavior;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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