IDEAS home Printed from https://ideas.repec.org/a/rnd/arimbr/v4y2012i10p532-536.html
   My bibliography  Save this article

Implication of Behavioral Finance in Investment Decision-making Process

Author

Listed:
  • Agha Jahanzeb
  • Saif-ur-Rehman

Abstract

Behavioral finance is a structure that supplements some parts of standard finance and replaces other parts. It portrays the behavior of investors and management in decision-making; it illustrates the outcomes of interactions between investors and managers in financial and capital markets. As decisionmaking is an art to undertake complex situations and investors make irrational decisions during their investments. Therefore, it is a unique art to choose a certain alternative from various alternatives available. Although behavioral finance does not claim that every investor would suffer from similar illusion, instead it sheds light on to take necessary initiatives to avoid such illusions, which influence the process of decision-making, particularly while making investments.

Suggested Citation

  • Agha Jahanzeb & Saif-ur-Rehman, 2012. "Implication of Behavioral Finance in Investment Decision-making Process," Information Management and Business Review, AMH International, vol. 4(10), pages 532-536.
    • Handle: RePEc:rnd:arimbr:v:4:y:2012:i:10:p:532-536
    DOI: 10.22610/imbr.v4i10.1009
    as

    Download full text from publisher

    File URL: https://ojs.amhinternational.com/index.php/imbr/article/view/1009/1009
    Download Restriction: no
    File URL: https://ojs.amhinternational.com/index.php/imbr/article/view/1009
    Download Restriction: no
    File URL: https://libkey.io/10.22610/imbr.v4i10.1009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
    2. Ulrich Schmidt & Horst Zank, 2005. "What is Loss Aversion?," Journal of Risk and Uncertainty, Springer, vol. 30(2), pages 157-167, January.
    3. Slovic, Paul, 1972. "Psychological Study of Human Judgment: Implications for Investment Decision-Making," Journal of Finance, American Finance Association, vol. 27(4), pages 779-799, September.
    4. Julius Margolis, 1958. "The Analysis of the Firm: Rationalism, Conventionalism, and Behaviorism," The Journal of Business, University of Chicago Press, vol. 31, pages 187-187.
    5. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    6. Saqib Muneer, 2012. "Materialization of Behavioral Finance and Behavioral Portfolio Theory: A Brief Review," Journal of Economics and Behavioral Studies, AMH International, vol. 4(8), pages 431-435.
    7. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    8. Dennis Dittrich & Werner Guth & Boris Maciejovsky, 2005. "Overconfidence in investment decisions: An experimental approach," The European Journal of Finance, Taylor & Francis Journals, vol. 11(6), pages 471-491.
    9. Shefrin, Hersh & Statman, Meir, 1994. "Behavioral Capital Asset Pricing Theory," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(3), pages 323-349, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniel N Mlambo & Victor H Mlambo & Mandla A Mubecua, 2018. "The Rise of Chinese Investments in Africa: For Whose Benefit?," Journal of Economics and Behavioral Studies, AMH International, vol. 10(4), pages 81-87.
    2. Sune Ferreira-Schenk & Zandri Dickason-Koekemoer, 2023. "Analysing the Factors Affecting the Long-term Investment Intention of Investors," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 112-120, January.
    3. Nicola Capolupo & Zuzana Virglerova & Angelo Rosa & Dario Natale Palmucci, 2024. "The relationship between biases and entrepreneurial Decision-Making. Evidence from Italian and Czech SMEs," International Entrepreneurship and Management Journal, Springer, vol. 20(4), pages 3323-3348, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jasman Tuyon & Zamri Ahmad, 2021. "Dynamic risk attributes in Malaysia stock markets: Behavioural finance insights," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5793-5814, October.
    2. Jasman Tuyon & Zamri Ahmad, 2018. "Behavioural Asset Pricing Determinants in a Factor and Style Investing Framework," Capital Markets Review, Malaysian Finance Association, vol. 26(2), pages 32-52.
    3. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    4. Leković Milјan, 2020. "Cognitive Biases as an Integral Part of Behavioral Finance," Economic Themes, Sciendo, vol. 58(1), pages 75-96, March.
    5. Emmanuel PETIT, 2010. "The role of regret in the persistence of anomalies in financial markets (In French)," Cahiers du GREThA (2007-2019) 2010-07, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    6. P. Février & L. Wilner, 2012. "Do Consumers Correctly Expect Price Reductions? Testing Dynamic Behavior," Documents de Travail de l'Insee - INSEE Working Papers g2012-03, Institut National de la Statistique et des Etudes Economiques.
    7. Zamri Ahmad & Haslindar Ibrahim & Jasman Tuyon, 2017. "Institutional investor behavioral biases: syntheses of theory and evidence," Management Research Review, Emerald Group Publishing Limited, vol. 40(5), pages 578-603, May.
    8. Daniele SCHILIRÒ, 2013. "Bounded Rationality: Psychology, Economics And The Financial Crises," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 4(1), pages 97-108.
    9. Edward L. Glaeser, 2004. "Psychology and the Market," American Economic Review, American Economic Association, vol. 94(2), pages 408-413, May.
    10. Steven Beckman & Lanxin Chen & Greg DeAngelo & W. James Smith & Xieting Zhang, 2011. "Microeconomics and Psychology," The Journal of Economic Education, Taylor & Francis Journals, vol. 42(3), pages 255-269, July.
    11. Daniel Kahneman, 2003. "A Psychological Perspective on Economics," American Economic Review, American Economic Association, vol. 93(2), pages 162-168, May.
    12. Blake, David & Cairns, Andrew & Dowd, Kevin, 2008. "Turning pension plans into pension planes: What investment strategy designers of defined contribution pension plans can learn from commercial aircraft designers," MPRA Paper 33749, University Library of Munich, Germany.
    13. Xavier Gabaix, 2017. "Behavioral Inattention," NBER Working Papers 24096, National Bureau of Economic Research, Inc.
    14. Daniele Schilirò, 2012. "Bounded Rationality And Perfect Rationality: Psychology Into Economics," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 3(2), pages 99-108.
    15. Gürtler, Marc & Hartmann, Nora, 2003. "Behavioral dividend policy," Working Papers FW04V1, Technische Universität Braunschweig, Institute of Finance.
    16. Eduard Marinov, 2017. "The 2017 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 117-159.
    17. Committee, Nobel Prize, 2017. "Richard H. Thaler: Integrating Economics with Psychology," Nobel Prize in Economics documents 2017-1, Nobel Prize Committee.
    18. Rodgers, Waymond & Hudson, Robert & Economou, Fotini, 2023. "Modelling credit and investment decisions based on AI algorithmic behavioral pathways," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    19. Krzysztof Zieliński, 2012. "Błędy popełniane w procesie podejmowania decyzji w świetle behawioralnej ekonomii finansowej," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 31.
    20. Elisabeth Gsottbauer & Jeroen Bergh, 2011. "Environmental Policy Theory Given Bounded Rationality and Other-regarding Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(2), pages 263-304, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rnd:arimbr:v:4:y:2012:i:10:p:532-536. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Muhammad Tayyab (email available below). General contact details of provider: https://ojs.amhinternational.com/index.php/imbr .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.