Behavioral Finance Theory And Research On Its Application

Since 1990's, the appearance and development of behavioral finance theory have given a great impact to traditional finance theory and behavioral finance theory became a research field that attracted pervasive attention. Traditional finance theory studies is based on the two hypotheses-rational agents and efficient market hypothesis. However, while we get a deeper thought of the function of the capital market and the behavior of investors, we find that on the one hand, these two hypotheses are not in accord with the fact, on the other hand, some anomalies that standard finance theory can not explain appear in the market. So, behavioral finance theory comes into being.This paper chooses behavioral finance theory and research on its application to be the object of research and studies the application of behavioral finance theory in the security markets and corporate finance, referring to foreign research productions of behavioral finance theory and thinking the facts in our country. This paper is separated into four parts. The first part is introduction, in which the background, meaning, methods and main content of the research are given. The second part is the summarization of behavioral finance theory, which discusses the origin, development, theoretical base and main content of behavioral finance theory. And this paper evaluates its characteristics and localizations, then the implication to us is given. A basic frame of analysis, which uses behavioral finance theory, is established through this part's presentation. The third part is the research on application of behavioral finance theory in the security market. Behavioral finance theory began with explaining anomalies. So in this part, this paper uses behavioral finance theory to explain anomalies. Then investors' behavior, invest strategy and conception base on behavioral finance theory are pointed out. Finally this part discusses its reference to the supervising in security market. The forth part is the research on application of behavioral finance theory in corporate finance. Corporate finance activities mainly include financing, investing and dividendpolicies. So in this part the direction effect of behavioral finance theory to these three policies are introduced and discussed. In allusion to some special capital collocation, this part studies the impact of manager irrational. Finally this paper generalizes some basic results when we apply behavioral finance theory to corporate finance.