ehavioral finance can shed light on many areas of investing, including valuation. In this presentation, I will discuss some of the key behavioral phenomena and how they relate to particular issues associated with analyst perceptions about returns (namely, representativeness and affect). I will then compare returns for what I call “behavioral mean– variance portfolios” with those of traditional ...

We explore the role of comparables in price formation. Using data on corporate loans, we exploit the lag between loans’ closing dates and their inclusion in a widely-used comparables database to identify the causal effect of past transactions on new transaction pricing. We find that comparables pricing is an important determinant of individual loan spreads, but a failure to account for the over...

Econophysics has developed as a research field that applies the formalism of Statistical Mechanics and Quantum Mechanics to address Economics and Finance problems. The branch of Econophysics that applies of Quantum Theory to Economics and Finance is called Quantum Econophysics. In Finance, Quantum Econophysics’ contributions have ranged from option pricing to market dynamics modeling, behaviora...

The aim of this paper is to identify the behavioral and psychologic biases that may affect investment decisions individual investors in Bangladesh. This study considered anomalies such as Cognitive Dissonance, Regret Aversion, Loss Overconfidence, Hindsight, Illusion Control, Herd instinct, Self-attribution Representativeness, analyzed how significantly each these would prevail by preventing fr...

Real investors and markets are too complicated to be neatly summarized by a few selected biases and trading frictions. The “top down” approach to behavioral finance focuses on the measurement of reduced form, aggregate sentiment and traces its effects to stock returns. It builds on the two broader and more irrefutable assumptions of behavioral finance—sentiment and the limits to arbitrage—to ex...

Recent literature in empirical finance is surveyed in its relation to underlying behavioral principles, principles which come primarily from psychology, sociology and anthropology. The behavioral principles discussed are: prospect theory, regret and cognitive dissonance, anchoring, mental compartments, overconfidence, overand underreaction, representativeness heuristic, the disjunction effect, ...