The Influence of Investor Psychology

The Influence of Investor Psychology Abstract: The efficient market guess (EMH) could not be supported by most of the falsifiable researches results in 1980s. Previous studies which atomic number 18 related to the model of behavior imply that some non-rational investors would invest anomalies in certain market. In 1979, Kahneman and Tversky suggested to make the prospect theory as an optional pickaxe which was expected utility when it came to describe investors behaviors. Based on away works (Lichtenstein, Fischhoff and Phillips, 1982; Shefrin and Statman, 1985), this paper checked the overconfidence influence, the mental explanation, the annoyance of regret and the self-control with the disposition effect of selling winners besides early and holding losers excessively long. The res ults of data analysis on 290 investors demonstrate that there are four psychological factors having common influence on the disposition effect.

The researches show that: (a) overconfidence, mental accountancy and self- control would proceed the disposition effect positively, and (b) self-control would come across the disposition effect negatively. Therefore self-control could bring knock off pat(p) the investorsirrational behaviors. Introduction An old Wall Street adage states that cardinal factors move the market: fear and greed. Although true, this characterization is faraway too simplistic. The human mind is rattling sophisticated, and human e! motions are very complex. The emotions of fear and greed just dont adequately describe the psychology that affects people. Few other texts add this discipline beca implement traditional finance has foc recitationd on developing the tools that investors use to optimize expected return and risk. This effort has been fruitful, yielding tools much(prenominal) as asset pricing models, portfolio theories, and option pricing. Although investors should use these tools in their investment...If you want to get a full essay, array it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay