Behavioral Finance is one of the new topics that has been raised by some financial thinkers in the last two decades and has quickly attracted the attention of professors, experts and students in this field around the world, so that today these topics cause The formation of an independent branch of study in financial knowledge has become.
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What is the basis of behavioral finance?
Assuming that investors are rational as a simple model of human behavior is one of the main foundations of classical financial knowledge and almost all classical financial theories such as portfolio theory, capital market efficiency, capital asset pricing model (CAPM) and theory Agency Theory and the sub-theories derived from them are affected by this assumption. In terms of behavioral financial knowledge, this assumption is not able to explain the behavior of investors due to its unreality.
The emergence of phenomena such as price bubbles in the stock market, the existence of excessive fluctuations in stock prices, more (less) than the size of investors to new information, has been opposed to the theory of capital market efficiency. By testing many hypotheses, researchers show evidence of so-called stock market anomalies, which include fundamental irregularities, technical irregularities, and chronological irregularities. Irregularities are irregularities that are incompatible with the inherent valuation of stocks based on fundamental factors. Technical analysis claims that by studying the behavior of historical stock prices, future prices can be predicted. Contrary to the calendar rule, it shows different effects on stock prices and returns, the most famous of which is the January effect, which has a history of about 25 years.
Efficient market theory in behavioral financial knowledge
As we all know, all these irregularities are inconsistent with the theory of market efficiency. What behavioral finance science seeks as a new branch of study is an attempt to explain phenomena such as those referred to. These studies try to describe what is happening in capital markets and provide a plausible explanation for investor behavior and market behaviors by using psychological knowledge and incorporating psychological factors into financial theories and models. This field has now attracted the attention of universities and capital market activists and has attracted many comments.
Behavioral finance uses terms and concepts that seem unfamiliar at first glance because of the use of psychological topics to describe the behavior of investors and capital markets. This problem is exacerbated when we want to put them in another language. Translate (Persian). The material that we write for you in this series of articles has been translated by Dr. Ahmad Badri and written with an approach that is highly recommended to consultants, analysts, traders, traders and capital market managers.
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