A study of behavioral finance in the Indian stock exchange

Type :

Indian project

Pages :

32 pages

Format :

.doc

Published date :

04/01/2009

Category :

Economics & finance

Sub category :

Finance

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Summary :

Introduction
An overview of behavioral finance
1. Objectives of the study
2. Sources of information
3. Limitations of the study
Profile of Hyderabad Stock Exchange
Investing in Securities Market
Industry profile
1. Historical evolution
2. Definitions
3. Scope and implications
A study of various biases or heuristics
1. Applicability of such biases in Indian stock market
Application of behavioral finance
Bibliography
Conclusion

Abstract

Much of economic and financial theory is based on the notion that individuals act rationally and consider all available information in the decision-making process. However, researchers have uncovered a surprisingly large amount of evidence that this is frequently not the case. Peter L. Bernstein in Against The Gods states that the evidence "reveals repeated patterns of irrationality, inconsistency, and incompetence in the ways human beings arrive at decisions and choices when faced with uncertainty." A field known as "behavioral finance" has evolved that attempts to better understand and explain how emotions and cognitive errors influence investors and the decision-making process. Many researchers believe that the study of psychology and other social sciences can shed considerable light on the efficiency of financial markets as well as explain many stock market anomalies, market bubbles, and crashes. As an example, some believe that the out performance of value investing results from investor's irrational overconfidence in exciting growth companies and from the fact that investors generate pleasure and pride from owning growth stocks. Many researchers believe that these human flaws are consistent, predictable, and can be exploited for profit.