Behavioral finance: Finance with normal people

Behavioral Finance Models and Behavioral Biases in Stock Price Forecasting

Stock market is affected by news and information. If the stock market is not efficient, the reaction of stock price to news and information will place the stock market in overreaction and under-reaction states. Many models have been already presented by using different tools and techniques to forecast the stock market behavior. In this study, the reaction of stock price in the stock market was ...

The End of Behavioral Finance

n 1985, Werner De Bondt and I published an article that asked the question: “Does the stock market overreact?” The article was controversial because it gave evidence to support the hypothesis that a cognitive bias (investor overreaction to a long series of bad news) could produce predictable mispricing of stocks traded on the NYSE. Although this idea was hardly shocking to practitioners, the co...

New Insights into Behavioral Finance

Reading 7 the Behavioral Finance Perspective Introduction

To provide a framework for understanding the implications of the decision-making process for financial market practitioners, throughout this reading we will use an approach developed by decision theorist, Howard Raiffa. Raiffa (1997) discusses three approaches to the analysis of decisions that provide a more accurate view of a “real” person’s thought process. He uses the terms normative analysi...

From Efficient Markets Theory to Behavioral Finance

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