| People are working on designing increasingly complicated mathematical model to forecast the changing trend of stock market for the minimization of risk. The reliability of their forecast has not been improved because the most important role in investment strategy is the very psychological factor. The cause of irrational decision is not the lack of analysis means, but the particular human behavior pattern .Furious emotional fluctuation, such as greed, fear, overconfidence, and the great spur to override other competitors drives away the process of their cognition and decision.Behavioral finance is a hot issue in international monetary circle. The subject studies financial phenomena in the wider view of psychology and sociology. The paper mainly aims at discussing the investment behavior and the application of investment strategy based on behavioral finance theory. With the help of the theory of irrational behavior, cognition bias and the fundamentals of behavioral finance, the paper presents empirical description and analysis of excessive noise trade in China stock market and formed the conclusion that the decreased stock market deficiency is due to the inequality of gains and risks between institutional dealers and individual investors. the countermeasures are also offered in it.The paper analyzes the cognition bias such as overconfidence, overtrading and herd behavior and its influence on the stock investment in view of the psychological and behavioral fluctuation. By introducing fundamental and technological analysis, the paper reexamines the technological analysis in view of behavioral finance, and analyses the investment mechanism of behavioral finance and offered certain strategy and suggestionsBehavioral finance is the result of researching into human behavior and still has long way to go. The new emerging scientific method play an important role in controlling irrational decision and forecasting the following behavior for the participants in monetary operation. |
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