Essays on Behavioral Finance: Apple and UK Banks Shares Coursework

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The paper "Behavioral Finance: Apple and UK Banks Shares" is a great example of finance and accounting coursework.   One of the major assumptions in the current economic and finance world is that investors are rational in their choice of investment options; they tend to seek ways to increase their wealth In other words, they are wealth maximizers because they resort to options that seem to be profitable to them and non-complicated (Shefrin 2002). From the conventional economics perspective, investors’ emotions and other extraneous factors do not have an influence on the decision of investment options or economic choices.

However, this assumption does not hold water since it does not reflect on how investors behave in the real world. The plain fact is that individuals often behave irrationally when choosing investment options. The difference between the real world and the principles in economics prompted scholars to study cognitive psychology to answer the question of irrationality and illogical behaviors the convention economics and finance did not explain. This is now where behavioral finance comes in; it seeks to explain the ordinary man’ s behaviors when it comes to choosing between two options (Shefrin 2002).

Cognitive psychologists such as Daniel Kahneman and Amos Tversky who are considered as fathers of behavioral finance conceived the concept of biases and heuristic approaches. These psychologists focused their study on cognitive biases and the heuristic approaches of problem-solving to shade more light on the understanding of people's irrational behavior. They later blended the economics and finance concepts with those of cognitive psychology hence behavioral finance. This paper focuses on the concepts of behavioral finance; it shows how these concepts affect the investors’ behavior on the markets. Overview of UK banks and Apple Company report Trading in the UK banks’ shares has become a lot more uncertain due to the slow economic growth rate in western economies.

Moreover, the banking industry is struggling with the impact of low-interest rate; this has slowed down investment banking from the investors (Michael, Sayer & Harman 2011). At such uncertain times, banks resort to delivering innovative solutions to their customers, this is necessary and important to maintain long-term profitability.


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