BEHAVIORAL FINANCE
Behavioral finance is the science that conducts research on the psychological aspect of finance. Why did it arise? The answer to the question is of the kind that will shed light on the debate about whether history consists of repetition or not.
Actually, behavioral finance, which seems to emerge as a new science when evaluated, focuses on what the investors are affected by when making investment decisions. The said investor profile here covers a wide range from long-term investment in stock markets to short-term investors who are called loggers.
Training on behavioral finance, which investigates how the decision process is affected and how it occurs in buying or selling a financial instrument in order to make money as content, offers opportunities to support healthy trading decisions of investors.
Eugene Fama, who made the definition of the efficient market hypothesis in the 1970s, summarizes that; It is a market efficient market where profit maximization is aimed, competing with many investors and all kinds of information that may affect the value of the financial instrument to be traded is known by all investors, and its investors are rational. The main topics that stand out here are that the investor is rational, the investors who do not act rationally are perfect competition in the market, equal access to information, the information being in the price, and the elimination of prices with assumed market dynamics, such as the fact that prices do not change with information but are random.
So does the investor really act rationally? The answer is, why should someone who wants to earn money not act rationally? Will. The logic that the desire to earn money drives the investor to act rationally does not actually work, but it is one of the cornerstones of the efficient market hypothesis.
While the efficient market hypothesis defines people as rational, behavioral finance reveals that people are affected by many factors such as external influences and individual experiences, rather than rational finance.
The first studies on behavioral finance were Daniel Kahneman, Amos Twersky and Paul Slovic. An important gap has been filled in finance by emphasizing that human behavior has a great place in investment decisions with the studies conducted.
AUTHOR:
Ali Erkan TANACIOĞLU
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