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Knowledge Capital – Influenced By Rationality Or Animal Spirits?

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  • Oprean Camelia

    (University Lucian Blaga of Sibiu)

Abstract

It is already a well-accepted concept in expansion, the economy, organization and management based on knowledge. It is said that the owners of knowledge, respectively the individual, organization and the society, will hold the power in the future. Thus, the knowledge become the economic and personal basic resource and all the activities from the economic sphere are prevailingly concentrated on the treatment of information and producing of knowledge goods. However, it is still difficult to explain on a strict scientific basis why people behave non-rational when facing with money decisions. Classic finance foundation lays on strict rationality and optimization of financial decisions. We affirm that monetary and financial decisions are significantly influenced by psychological factors. Behavioural Finance adds to the equation the psychological and emotional facets of the human decision. This emerging discipline has challenged the Efficient Market Hypothesis, arguing that markets are not rational, but are driven by fear and greed instead. The paper proposes a critical analysis, based on consistency criteria, regarding the controversy current state of the informational efficiency theory of the capital market. In this sense, the critical approach is one that shows the weaknesses, the vulnerable aspects that characterize the classical form of EMH theory. Also, the paper highlights the most significant criticisms levelled against EMH by psychologists and behavioural economists.

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  • Oprean Camelia, 2014. "Knowledge Capital – Influenced By Rationality Or Animal Spirits?," Balkan Region Conference on Engineering and Business Education, Sciendo, vol. 1(1), pages 347-352, August.
    • Handle: RePEc:vrs:brcebe:v:1:y:2014:i:1:p:347-352:n:52
    DOI: 10.2478/cplbu-2014-0052
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    1. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    2. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
    3. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    4. Lo, Andrew W, 1991. "Long-Term Memory in Stock Market Prices," Econometrica, Econometric Society, vol. 59(5), pages 1279-1313, September.
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