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Behavioral Finance
Decision making is an important and heterogeneous activity. Decisions need to be made with keeping all the aspects of the financial resources available and situations into consideration.
A situation based on decision-making task comprises not only the specific problem which is faced by the individual but also it extends to the environment. Decision making is the process of selecting the best option available from the number of available options. Any particular decision is taken after evaluating all the alternatives available. To take the decision one should update themselves in all the fields available so that they can get the required results /goals in the competitive business environment.
Behavioral finance is the study of the significance of therapy on the behavior of the financial analysts or the advisors and the related effect on the market. It is the study which helps in making the financial decisions in the financial market. It is the framework that strengthens some parts of the fundamental finance and replaces the other parts. It describes the behavior of the investors and managers, outcomes of the interactions among the investors and the managers in the financial and the capital markets.
The main goal of an investment is to make money. In earlier times, investment was based on the performance, calculated, market timing and so on. Due to this, there was a huge gap between the available or estimated returns and the actually received returns which forced them to find the reasons for this gap. The result of this examination of finding reasons for the above was that it was caused due to the mistakes in the fundamental process. So as a result, the researchers began to study the field of Behavioral Finance several years ago itself, to understand the psychological processes behind these mistakes. Thus Behavioral Finance is not new in the field of finance and is a very popular in the world for making Investment decisions.
Behavioral finance and the BehavioralEconomics are closely related fields which apply scientific research on individuals and social awareness and emotional beliefs to better understand economic decisions and how they affect the financial returns, allocation of resources and market prices.
Behavioral Finance mainly focuses on how the investors interpret and act on information to make informed investment decisions. Its emphasis on the investor behavior leading to various market anomalies.
