INTERNATIONAL JOURNAL OF SCIENTIFIC DEVELOPMENT AND RESEARCH International Peer Reviewed & Refereed Journals, Open Access Journal ISSN Approved Journal No: 2455-2631 | Impact factor: 8.15 | ESTD Year: 2016
open access , Peer-reviewed, and Refereed Journals, Impact factor 8.15
While standard finance emphasizes theories such as modern portfolio theory and the efficient market hypothesis, this paper explores the evolution of modern behavioral finance theories from the traditional framework. Behavioral finance is a financial theory which has risen since 1980s. In recent years its influence has increasingly spread and has vigorously challenged modern financial theories to the investors for better decision making. It discusses three main issues. First, it predicts the importance of standard finance theories and the situations where they become insufficient i.e. market anomalies. Second, it signifies the role of behavioral finance in narrowing down the gaps between traditional finance theories and actual market conditions. This involves the substitution of standard finance theories with more realistic behavioral theories like the prospect theory (Kahneman & Tversky, 1979). In the end, it discusses some general principles of behavioral biases including the following: heuristic factors, herd behavior, financial cognitive dissonance, the theory of regret, and prospect theory, their underlying psychology and their impact on financial markets and decision making of investors.
Keywords:
Standard finance, Behavioral Finance, Behavioral Biases, Investment Decision.
Cite Article:
"EVOLUTION OF BEHAVIORAL FINANCE", International Journal of Science & Engineering Development Research (www.ijsdr.org), ISSN:2455-2631, Vol.5, Issue 3, page no.209 - 215, March-2020, Available :http://www.ijsdr.org/papers/IJSDR2003039.pdf
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Publication Details:
Published Paper ID: IJSDR2003039
Registration ID:191483
Published In: Volume 5 Issue 3, March-2020
DOI (Digital Object Identifier):
Page No: 209 - 215
Publisher: IJSDR | www.ijsdr.org
ISSN Number: 2455-2631
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