Author

  • Agha Jahanzeb

    • Faculty of Management and Human Resource Development (FPPSM), University Technology Malaysia, Malaysia
    • Malaysia

  • Saqib Muneer

    • Faculty of Management and Human Resource Development (FPPSM), University Technology Malaysia, Malaysia
    • Malaysia

  • Saif-ur-Rehman

    • Faculty of Management and Human Resource Development (FPPSM), University Technology Malaysia, Malaysia
    • Malaysia

Abstract

Behavioral finance is a structure that supplements some parts of standard finance and replaces other parts. It portrays the behavior of investors and management in decision-making; it illustrates the outcomes of interactions between investors and managers in financial and capital markets. As decisionmaking is an art to undertake complex situations and investors make irrational decisions during their investments. Therefore, it is a unique art to choose a certain alternative from various alternatives available. Although behavioral finance does not claim that every investor would suffer from similar illusion, instead it sheds light on to take necessary initiatives to avoid such illusions, which influence the process of decision-making, particularly while making investments.

Keywords

References

  • Cyert, R. M. & James, G. M. (1963). A Behavioural Theory of the Firm. Englewood Cliffs, NJ: Prentice-Hall. Dittrich, D., Guth, W. & Maciejovsky, B. (2005). Overconfidence in investment decisions: An experimental approach. European Journal of Finance, Taylor and Francis Journals , 11(6), 471-491.
  • Kahneman, D. & Tversky, A. (1979). Prospect theory: An analysis of decision making under risk. Econometrica , 47(2), 263-291.
  • Kahneman, D. & Tversky, A. (1982). The psychology of preferences. Scientific Ameri- can , 246, 160-73.
  • Lintner, G. (1998). Behavioural finance: Why investors make bad decisions. The Planner , 13(1), 7-8.
  • Margolis, J. (1958). The Analysis of the Firm: Rationalism, Conventionalism, and Behaviourism. Journal of Business , 31(3), 187-199.
  • Muneer, S. & Rehman, U. S. (2012). Materialization of Behavioural Finance and Behavioural Portfolio Theory: A Brief Review. Journal of Economics and Behavioural Studies , 4(8), 431-435.
  • Olsen, R. (1998). Behavioural finance and its implications for stock price volatility. Financial Analysts Journal , 54(2), 10-18.
  • Ross, S. A., Westerfield, R. W. & Jefferey, J. (2004). Corporate Finance. 7th ed. New York, NY: McGrawHill/Irwin.
  • Schmidt, U. & Zankb, H. (2002). What is Loss Aversion? available at http://lossaversion.behaviouralfinance.net/ScZa02.pdf
  • Shefrin, H. & Meir, S. (1994). Behavioural Capital Asset Pricing Theory. Journal of Financial and Quantitative Analysis , 29(3), 323–349.
  • Simon, H. A. (1955). A behavioural model of rational choice. The Quarterly Journal of Economics , 69(1), 99118.
  • Simon, H. A. (1959). Theories of decision-making in economics and behavioural science. American Economic Review , 49, 253–283.
  • Slovic, P. (1972). Psychological study of human judgement: Implications for investment decision-making. Journal of Finance , 27, 779-801.
  • Slovic, P. & Lichtenstein, S. (1971). Comparison of Bayesian and regression approaches to the study of information processing in judgment. Organizational Behaviour and Human Performance , 6, 649744.
  • Thaler, R. J. (1999). Mental Accounting Matters. Journal of Behavioural Decision making , 12, 183-206.
  • Thaler, R. (1980). Toward a Positive Theory of Consumer Choice. Journal of Economic Behaviour and Organization , 1, 39-60.
  • Thaler, R. & Shefrin, H. (1981). An economic theory of self-control. Journal of Political Economy , 89(2), 392-410.
  • Tversky, A. & Kahneman, D. (1974). Judgement under uncertainty: Heuristics and biases. Science , 185, 1124-1131.
  • Venkatesh, B. (2002). What is Loss Aversion?’ Business Line, Sunday, December -01.

Downloads

No downloads have been recorded for this article yet. Figures appear here once readers begin downloading the full text.

How to Cite

Jahanzeb, A., Muneer, S., & Rehman, S.- ur. (2012). Implication of Behavioral Finance in Investment Decision-making Process. Information Management and Business Review, 4(10), 532-536. https://doi.org/10.22610/imbr.v4i10.1009

Share this article

License

Copyright (c) 2012 Agha Jahanzeb, Saqib Muneer, Saif-ur-Rehman (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team  edits and formats manuscripts to bring uniformity and standardization in published material.

This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.

Keywords

Section

Research Paper

Published in

Vol. 4 No. 10 (2012) Information, Services & Strategy View issue contents

Published

2012-10-15

Submissions

Have research to publish? Information Management and Business Review welcomes submissions.

Make a Submission