07-04-2024, 11:18 PM
Behavioral Finance: Psychology in Financial Decision-Making
Exploring Cognitive Biases, Emotional Influences, and Market Anomalies to Enhance Financial Decision-Making Strategies
New
Rating: 0.0 out of 5
(0 ratings)
483 students
3.5 hours on-demand video
Description
A warm welcome to the Behavioral Finance course by Uplatz.
Behavioral Finance is a field of study that combines psychology and economics to explain why and how people make irrational financial decisions. It challenges the traditional economic theory, which assumes that individuals are rational actors who always make decisions to maximize their utility. Behavioral finance recognizes that cognitive biases, emotions, and social influences can lead to deviations from rational behavior.
Behavioral finance seeks to better understand these and other phenomena by integrating insights from psychology into economic models, thereby providing a more comprehensive view of how financial markets operate and how investors make decisions.
Key aspects of behavioral finance include:
Cognitive Biases: Systematic patterns of deviation from norm or rationality in judgment, such as overconfidence, anchoring, and hindsight bias.
Emotional Influence: Emotions like fear, greed, and regret significantly impact financial decision-making, often leading to suboptimal choices.
Heuristics: Mental shortcuts or rules of thumb that simplify decision-making but can lead to biases and errors.
Prospect Theory: Developed by Daniel Kahneman and Amos Tversky, this theory describes how people choose between probabilistic alternatives and evaluate potential losses and gains, highlighting that losses are often perceived as more significant than gains of the same size.
Market Anomalies: Observations that cannot be explained by traditional financial theories, such as stock market bubbles, crashes, and the excess volatility of stock prices.
Framing Effects: The way information is presented can significantly affect decisions. For example, people may react differently to a choice framed in terms of potential gains versus potential losses.
Overreaction and Underreaction: Investors might overreact to new information, causing excessive price movements, or underreact, leading to slower adjustments in stock prices.
Herd Behavior: Investors tend to follow the crowd, which can lead to market trends and bubbles.
https://www.udemy.com/course/behavioral-finance/?couponCode=BEHAVIORAL_F_UPLATZ
Enjoy!
Exploring Cognitive Biases, Emotional Influences, and Market Anomalies to Enhance Financial Decision-Making Strategies
New
Rating: 0.0 out of 5
(0 ratings)
483 students
3.5 hours on-demand video
Description
A warm welcome to the Behavioral Finance course by Uplatz.
Behavioral Finance is a field of study that combines psychology and economics to explain why and how people make irrational financial decisions. It challenges the traditional economic theory, which assumes that individuals are rational actors who always make decisions to maximize their utility. Behavioral finance recognizes that cognitive biases, emotions, and social influences can lead to deviations from rational behavior.
Behavioral finance seeks to better understand these and other phenomena by integrating insights from psychology into economic models, thereby providing a more comprehensive view of how financial markets operate and how investors make decisions.
Key aspects of behavioral finance include:
Cognitive Biases: Systematic patterns of deviation from norm or rationality in judgment, such as overconfidence, anchoring, and hindsight bias.
Emotional Influence: Emotions like fear, greed, and regret significantly impact financial decision-making, often leading to suboptimal choices.
Heuristics: Mental shortcuts or rules of thumb that simplify decision-making but can lead to biases and errors.
Prospect Theory: Developed by Daniel Kahneman and Amos Tversky, this theory describes how people choose between probabilistic alternatives and evaluate potential losses and gains, highlighting that losses are often perceived as more significant than gains of the same size.
Market Anomalies: Observations that cannot be explained by traditional financial theories, such as stock market bubbles, crashes, and the excess volatility of stock prices.
Framing Effects: The way information is presented can significantly affect decisions. For example, people may react differently to a choice framed in terms of potential gains versus potential losses.
Overreaction and Underreaction: Investors might overreact to new information, causing excessive price movements, or underreact, leading to slower adjustments in stock prices.
Herd Behavior: Investors tend to follow the crowd, which can lead to market trends and bubbles.
https://www.udemy.com/course/behavioral-finance/?couponCode=BEHAVIORAL_F_UPLATZ
Enjoy!