Behavioral finance

Author: Goebelberg
Publisher:
Publish Date: 2004-04-01
Features: Pure financial theory does not consider people's emotional fluctuations, cognitive biases, and expectations, yet these factors often lead people to make poor decisions. Although aware of the slim chances of success, people are still willing to take a gamble on opportunities with high rewards and extremely low winning probabilities, as evidenced by the widespread popularity of lottery drawings worldwide. Therefore, social behavior is far more useful than mathematical and physical theory models. Many people follow rumors, insider information, or the crowd without wanting to make objective and fair judgments on certain matters. The two authors of this book—one an experienced practitioner in the financial market and the other an expert in market psychology—elucidate the scientific significance of behavioral finance. The book explores several issues related to decision-making in the pursuit of better investment opportunities, how decisions influence the volatility of securities prices, and how investors select and communicate information.