Theoretical and Applied Economics
No. 4 / 2014 (593)
Behavioral finance: new research trends, socionomics and investor emotions
Bucharest University of Economic Studies, Romania
Alexandru OPROIU
Bucharest University of Economic Studies, Romania
Abstract. The paper presents a critique of standard investment analysis, fundamental and technical, and develops an alternative more comprehensive approach that should include some of the tenets of behavioral finance. In the pursuit of understanding the behavior of the market player, the basic argument relies on the supposition that the risk appetite increases exactly at the worst moment - when the capacity to assume additional risk decreases significantly. People view a sample randomly drawn from a population as highly representative and quasi similar to the population in all its essential characteristics. They expect any two samples drawn from a particular population to be more similar to one another and to the population than is statistically justifiable. This behavior is different from the tenets of classic finance theory. The paper aims at demonstrating that investor psychological biases lead to investment performance to tilt to the mean in the long run and by following the trend, the financial market population does not enjoy significant sustainable benefits. As a reflection of the behavioral biases and influences, the statistical demonstration supports the conclusion that markets do not random walk.
Contents
Banking relationship management – A new paradigm?
The analysis of time intervals for establishing types of users
VAR analysis on Foreign Direct Investment in Romania
Using the regression model for the portfolios analysis and management
The role of small and medium enterprises and poverty in Pakistan: An empirical analysis
Dimensions of the destination’s sensory profile. Case study: Muntenia
Corporate Governance in Eastern Europe: Case of Romania and Russian Federation
Study on the competitiveness of Small and Mediumsized Enterprises (SMEs) in Vâlcea County
Relation between monetary announcement and Phillips Curve? An empirical study from Malaysia
Management priorities to increase labor force flexibility in the Romanian organizations
Behavioral finance: new research trends, socionomics and investor emotions