CONTEMPORARY PROBLEMS IN BEHAVIORAL FINANCE

Abstract

Behavioral finance research is still in its infancy. In an attempt to comprehend why people make illogical financial decisions, this integrates behavior and cognitive psychology principles with traditional and emotional finance ideas. Human behavior, sociology, and economics and finance are the three disciplines that make up behavioral finance. It is the study of how individuals recognize their feelings in social situations. According to conventional financial theories, individuals make rational investment decisions after carefully considering pertinent factors in an effort to maximize profits and reduce losses. This article talks about common emotional mistakes that investors make when making decisions. To conduct the study, researchers have collected 546 observations. To ascertain, statistical techniques like factor analysis and multivariate regression are applied. Researchers discovered a strong correlation between mental accounting, remorse, availability, anchoring, and representative biases as well as herd behavior.

Keywords: herd behaviour, mental accounting, biases, behavioural finance, irrational financial decisions.