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Securities And Investment Strategies Based On Behavioral Finance Analysis

Posted on:2009-08-24Degree:MasterType:Thesis
Country:ChinaCandidate:J F SongFull Text:PDF
GTID:2199360272489503Subject:Business Administration
Abstract/Summary:PDF Full Text Request
From the very beginning of twenty years ago, the security markets of China has gotten a great development, its role in economy has expanded, and charmed a lots investors. But, as lots evidence has showed us that the historical risk of this market is apparently higher than its counterpart in the developed west countries. Even the west markets have showed us great volatility since last year, after the bankruptcy of New Century Financial Corporation in 2007 and Bear Stearns in 2008, and then Lehman Brothers since Sep., 2008. During the great up-and-downs of all the markets in this world, all the investors, including the institution and individuals, can not be labeled as "rational investors." All of them have show great un-rational fear and some kinds of speculation behavior.Behavior finance present great challenge for the conventional finance theory, but this is not to challenge the role of conventional finance in real economy, and it can not substitute its role. Instead, we can see behavior finance as subsidiary and further development of conventional finance and it can help to explain most of existing deviations from market efficiency.This article firstly explained the background of this research, and pointed out that the great volatility in market and the unreasonable investors both make up the sound foundation for the creation and development of behavior finance. In the second paragraph, this article briefly introduced the theoretical development of behavior finance and its current status, and the comparison between conventional finance and behavior finance. In the third paragraph, this article explained the mystery of dividend premium, time effect and dividend effect, etc. Then this article summarized the main recognition and behavior deviation of investors, including heuristic-driven bias, frame dependence, overconfidence, herding behavior, etc. The fourth paragraph is the key of this article. This paragraph mainly introduces the concepts of all the investment strategies based on behavior finance, experimental results and some cases. The main objective of analyzing deviations from efficiency and researching behavior finance is to know the very nature of the market, then present some investment strategies. The fifth part of this article is the conclusion of this study. The conclusion is that theoretical and experimental researches have shown us that all the investment strategies based on behavior finance can make sense if they are uses in an appropriate way. And all of these strategies have been used in real investments and the creation of behavior finance-based investment companies presents the effectiveness of these investment strategies.
Keywords/Search Tags:Behavior finance, investment strategy, contrarian strategy, momentum strategy
PDF Full Text Request
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