What is ‘traditional’ view in finance, challenges of the traditional view, behavioural finance as an alternative approach
‘Traditional’ finance theory: utility analysis, portfolio theory, asset pricing models, arbitrage, rational stock valuation
Efficient market hypothesis: theoretical underpinnings of the EMH, empirical evidence, irrational investors and market efficiency
Noise trader risk and arbitrage: risk due to noise trader activities, limited arbitrage and its consequences for the EMH
Investor sentiment and closed-end funds: irrational investors and their systematic impact on stock prices, empirical evidence
Agency theory and limits of arbitrage: agency theory and fund managers’ behaviour, limited arbitrage and the consequences for stock prices
Investor psychology: rational behaviour, deviations from rationality in investor’s preferences and beliefs, prospect theory and cognitive biases
A model of investor sentiment: investment decisions driven by representativeness and conservatism, deviations from market efficiency
Behavioural corporate finance: managerial decision making and exploitation of market inefficiencies, managers and investors as irrational individuals
How is the knowledge of behavioural finance helping us to better deal with money?