What is behavioral finance?
The concept of behavioral financing has to do with taking into account a number of psychological variables and how the resulting emotional reactions of these variables can affect personal and general economic conditions. The concept closely associated with the behavioral economy seeks to explain what happens when emotional reactions are involved in decisions that affect the stock market and prices of individual shares, market prices in selected markets and the allocation of financial resources in savings and expenditure habits. Here are some examples of factors that are usually taken into account by theorists to finance behavior.
There are three generally accepted factors that come into research and identify variable behavior because they are related to studying behavior. One factor is referred to as heuristics. The idea is that investors may decide to make economic decisions based on an idea of an idea or value that may or may not be related to basic economicprinciples. Heuristics does not have to observe the logical formula with anyone except the investor, nor is it necessarily based on factors such as performance history. These factors can often seem completed irrelevant to the outsider, even if they make perfect sense for the investor.
framing is the second factor that is taken into account in the study of behavior finance. This applies to the way in which the investor is presented a financial problem or opportunity. According to various behavioral theories, Verbiage and presentation will significantly influence the investor's situation that is made. The idea is that if the same facts were presented with a different approach, the decision that the investor had achieved would probably differ.
The third basic factor of behavioral financing is referred to as market inefficiency. Perhaps the strongest of the three basic factors, market inefficiency is still mIMO scope of generally accepted explanations for market performance. In principle, this factor of behavioral financing focuses on the outcome of the market event and identifies contributing elements that experts may or may not recognize as playing roles as a result. Examples of market inefficiency include events such as the acceptance of market anomalies and their production to market indicators, and isolated events where goods or services are incorrectly appreciated.
Behavioral finance is an ongoing process, with the effectiveness of the process in some neighborhoods in hot space. Nevertheless, the discipline attracts much attention and there is no doubt that research using behavioral finances as the basis will continue.