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Behavioral Finance: The Theory Of Behavioral Finance
621 Words2 Pages
Recommended: Case study ; behavioral finance
Numerous foreign scientists, and in recent years russian scientists confirmed that, acting under conditions of uncertainty and risk, people are influenced by a number of illusions, emotions, misperception of information and other irrational factors. It is maded on the identification of these factors and studing their impact on decision-making and financial investment, a new financial science - "behavioral finance."
The hypothesis of efficient financial markets (HEFM) over the last thirty years has been a central part of traditional financial theory. Classic definition given Fama (Fama, 1970): "Effective financial markets are markets in which the stock price fully reflects all available information about the company." 1970s were a period for HEFM of greatest popularity. One of the founders HEFM Michael Jensen argued that there is no other academic theory, which would have the same empirical evidence as the theory of efficient markets (Jensen, 1978).
However, over the past twenty years, theoretical and empirical basis HEFM was questioned. Behavioral finance emerged as an alternative ...
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