Essays on Behavioral Investment Strategies Coursework

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The paper "Behavioral Investment Strategies" is a good example of finance and accounting coursework.   Behavioral finance is a new field that tries to blend the cognitive and behavioral psychological theory with contemporary economics and finance. It seeks to explain why individuals make irrational financial decisions while running their business enterprises. The concept of behavioral finance takes into consideration a range of psychological variables. It also explains how consequent emotional reactions to these variables can affect both the individual and entire economic conditions. From the conventional finance theory, individuals and institutions are rational when it comes to financial investment; this means that they are wealth maximizers (Cartwright, 2011: 5).

Nevertheless, in many instances, emotions and psychology tend to affect their decisions, making them behave in an irrational and unpredictable manner. Therefore, this field is majorly concerned with the bounds o0f rationality of economic agents. The central subject in the field of behavioral finance is giving an explanation why investors tend to make systematic errors while trying to find the best options to invest in. In addition, this concept also seeks to investigate how other investors arbitrage these market inefficiencies (Levy, 2002:1).

When investors seek to maximize their investments, they make errors in their decisions; these errors influence the prices of the products and the returns on these products resulting in market inefficiencies. Many scholars have examined the financial markets hoping that they are going to find the best investments strategies that have good results. All of these scholars have based their theories on one assumption that state that both individual and institution investors act in a way that maximizes their profits. However, many types of research show that investors are always irrational.

This paper focuses on the concepts of behavioral finance and strategies used by investors to choose the best investments options in the security market.

References

Bibliographic references

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Accessed on web on 9th Dec 2012. Retrieved from http://www.jstor.org/discover/10.2307/2329305?uid=3738336&uid=2129&uid=2&uid=7 0&uid=4&sid=21101542158577

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