Implementation of Transactional Theory to Unlock the Secrets of Investor Behavior in the Capital Market

Abstract

When traditional financial theory is tested in an actual context, various anomalies have been discovered. Such anomalies are the result of deviations from the norms established by standard financial theory. Further analysis of the anomaly leads to the understanding that the actual observed behavior is not as modeled in traditional financial theory. Through a qualitative approach using the perspective of Lazarus Folkman's transactional theory, this article presents research findings that investors do not always behave rationally and/or always emotional. The character of human cognitive and affective potentials presents a very wide space of possibilities for collaboration and competition against these two potentials. In the end, the behavior of investors in making economic decisions is very complex and varied. Maximum cognitive with limited affective and vice versa maximal affective with limited cognitive is one of the findings that reflects the collaboration and competition of the potential that produces several kinds of investor behavior. The conceptual framework found in this study has the potential to be tested in subsequent research with a different method approach.

The Influence of Neural Behavior on Individuals’ Financial Decisions

“…The researchers are exploring and taking up complex technological to measure the emotional behavior of individualon the basis of past as well as present scenario. According to Alessandro D'Onofrio, "One of the most important implications is that our emotions aren't triggered just by our actual situation, but previous experience of failure or good result can activate emotions that play a very important role in our process of choice (D'Onofrio, 2017).The development of recent studies of behavioral finance, discusses in detail how brain system's work that is associated with the behavior of economic agents in making economic decisions is referred to as neuroeconomics (Maharani, 2016).The researchers are using functional magnetic resonance imaging (fMRI) in a controlled experimental setting (Frydman C. , 2015). A study conducted by (POLAT, 2022), tried to provide a comprehensive overview of the relationship between finance and psychopathology.…”