Behavioural factors implications on the stock market volatility and investors’ investment decisions
Rekha DM, Dr. H Prakash
Behavioral finance encompasses the research that emphasis on the traditional stock market assumptions of expected returns or income from investments is maximized with rational investors’ decisions in efficient markets. There are two aspects of behavioral finance which are assumed to be a pillar investment patterns in stock market are cognitive psychology like how people think about their investments and stock market performance and on the other hand limits to arbitrage that is when markets will be inefficient what would be the decisions taken by investors. The growth of behavioral finance research has been focused and given more importance to make a comparison between the inabilities of the traditional framework existence in the stock market to explain many empirical patterns, including stock market performance. Behavioral finance is the paradigm where financial markets are studied using certain models that are based on the modern theory and arbitrage assumptions.