Behavioural Finance: A Review and Synthesis

Subrahmanyam, Avanidhar

doi:10.1111/j.1468-036x.2007.00415.x

Cited by 250 publications

(139 citation statements)

References 180 publications

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“…Male overconfidence is considered to be an evolutionary trait due to their past positions as hunters and providers, and therefore risk takers, all which required confidence (Subrahmanyam, 2007). However, even in more modern times, men are still found to be significantly more confident than women across high and low knowledge groups (Gysler, Kruse & Schubert, 2002).…”

Section: Overconfidence and Self-attribution Biasmentioning

confidence: 99%

The value of financial advice: An analysis of the investment performance of advised and non-advised individual investors

Allie

West

Willows

2016

Investment Analysts Journal

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Financial advisors have long been considered a part of the financial market through the advice that they offer investors. Behavioural finance has demonstrated that individual investors do not always behave in a rational manner, unlike financial advisors who seem not be prone to the behavioural biases that individuals experience when investment decisions are made. Furthermore, financial advisors have greater access to information, financial analytical tools, as well as better education in financial markets compared to the average individual. Financial advisors are thus better equipped to assist individual investors and provide them with improved investment results.This study investigated the value added by financial advisors in the investment performance of advised individual investors as opposed to non-advised individuals. The study wanted to establish whether financially advised individuals showed greater return on investments than non-advised individuals. A sample of individual investors from a large South African investment house were analysed across the investment categories of an advised investor and a non-advised investor for a period of 10 years from 1 January 2005 to 31 December 2014. The data was analysed to draw conclusions on returns, trading behaviour, the risk profile of investors and the reasons for differences identified.The results indicated that there is no statistical difference between the returns generated between advised investors, non-advised investors and the fund invested over the period. There was a statistical difference between the number of trades entered into by advised and non-advised investors, with advised investors making statistically more trades than nonadvised investors. There was no significant difference between the risk profiles of the investors based on qualitative data. The results indicate that there is no significant additional benefit of utilising a financial advisor, after the initial decision of which fund to invest in has been made.3

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Section: Overconfidence and Self-attribution Biasmentioning

confidence: 99%

The value of financial advice: An analysis of the investment performance of advised and non-advised individual investors

Allie

West

Willows

2016

Investment Analysts Journal

View full text Add to dashboard Cite

show abstract

“…On the whole, the documented anomalies in the finance literature have contributed to the emergence of behavioural finance theorists who challenge the EMH by postulating that financial markets might fail to reflect economic fundamentals under a number of conditions which can result in significant and persistent biases (Subrahmanyam, 2007). Hirshleifer (2001) explained that investors are not always rational and may not correctly process all available information while forming their expectations of an asset's future performance and, as such, trades could occur as a result of such irrationality.…”

Section: Brief Review Of Relevant Literaturementioning

confidence: 99%

Stock Price Response to Earnings Announcements: Evidence From the Nigerian Stock Market

Afego

2013

Journal of African Business

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This paper examines the stock market reaction to annual earnings information releases using data on the Nigerian Stock Exchange. Using the event study method, the speed of reaction of the market to annual earnings information releases for a sample of 16 firms listed on the exchange is tested. Significant abnormal price reactions around earnings announcements suggest the earnings announcements contain value-relevant information. We find that the magnitude of the cumulative abnormal returns is dominated by significant reactions 20 days before the earnings release date which suggests that a portion of the market reaction may be due to private acquisition and, possibly, abuse of information by insiders. The persistent downward drift of the cumulative abnormal returns, 20 days after the announcement, is inconsistent with the efficient markets hypothesis, and therefore suggests that the Nigerian stock market does not efficiently adjust to earnings information for the sample firms within the study period.

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“…Frankel and Froot (1990) argued that there are two types of analysis for forex market namely, technical analysis and fundamental analysis. Technical analysis is considered as the behavioural finance approach which concerns with the traders' reactions to the new information and their behaviour against the price movements ( Barberis and Thaler, 2002;Shleifer, 2000;Subrahmanyam, 2007). Due to the fact that traders' psychology is vital in any trading process, psychological biases in forex trading have been proven by several researches.…”

Section: Related Workmentioning

confidence: 99%

Event-Driven Business Intelligence Approach for Real-Time Integration of Technical and Fundamental Analysis in Forex Market

Abuhamad

Mohd

Salim

2013

Journal of Computer Science

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Forex market is the most liquid financial market and the largest market in the world. Forex market has been analysed using two isolated approaches, technical analysis and fundamental analysis. Technical analysis attempts to predict the movement of prices by studying the historical data of the market whereas fundamental analysis concerns essentially with the overall state of the economy. Relying on one kind of analysis limits the quality of trading decisions therefore traders usually gain insight into the market by analysing many factors which may influence the market state and the price movement. This process has become increasingly challenging due to the vast and variant number of prices' determinants and the rapid changes in the market dynamics. This study proposes an event-driven business intelligence approach to respond immediately to any change in the market status by generating trading signals based on different analyses. Targeting the value associated with the data as it arrives, different models are built to capture and process the data of three currencies against US dollar in different frequency as well as the data of nine US macroeconomic indicators. The time-series data for both technical and fundamental indicators are modelled using artificial neural network while a knowledge base model is implemented to integrate the signals generated by time-series models. The experimental results show a remarkable improvement in the quality of trading signals using real-time consideration of different analyses.

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Behavioural Finance: A Review and Synthesis

Cited by 250 publications

References 180 publications

The value of financial advice: An analysis of the investment performance of advised and non-advised individual investors

The value of financial advice: An analysis of the investment performance of advised and non-advised individual investors

Stock Price Response to Earnings Announcements: Evidence From the Nigerian Stock Market

Event-Driven Business Intelligence Approach for Real-Time Integration of Technical and Fundamental Analysis in Forex Market

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