Behavioral finance thesis

behavioral finance thesis

on the assumption that the stock market consists of strictly rational, predictable and unbiased operating individuals, who seek to maximise returns. Introduction, shortly after Nokia announced that earnings and growth will be lower for one quarter due to its product cycles, the market responded (July 27, 2000) by trading nearly 3 of the companies entire cap and thereby erasing nearly 70 billion in market capitalisation. That means that although the companys earnings per share where up 77 over the previous year, the share price went down 27 on 121 million shares traded, because of one single announcement.

Thaler (1993) describes behavioural finance as simply open-minded finance claiming that sometimes in order to find a solution to an financial empirical puzzle it is necessary to entertain the possibility that some of the agents in the economy behave less than fully rational some. Criticism of behavioural finance will follow and the assignment will end with my conclusion. Behavioral finance got more and more popular as it got more complicated to explain the real situation (currency under-valuation, price bubbles etc.) at the stock market using approved methods. Isbn (eBook), file size 390 KB, language, english Notes Aspects of stock exchange psychology" paper Annekathrin Meyer (Author), 2003, Behavioural Finance, Munich, grin Verlag, m/document/18413 Comments. 2017 Students Assignment Help. Two influential thinkers regarding this theory are Harry Markowitz with his fundamental work on diversifying risks in money and capital markets (1952) and William Shape, who introduced the Capital Asset Pricing Model (1964)2.