A review paper on behavioral finance: study of emerging trends

Aditya Sharma · Arya Kumar

71 citations0/0 files storedQualitative Research in Financial Markets

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Markets and Investment Strategies Decision-Making and Behavioral Economics Stock Market Forecasting Methods

Abstract

Purpose This paper participates in the debate on market efficiency and correct approach for asset pricing through a comprehensive review of literature in favor, as well as against the long held belief of market efficiency. The purpose of this paper is to understand emerging trends in behavioral finance and establish its future potential as a mainstream alternative theory of asset pricing. Design/methodology/approach The review and discussion of literature is mainly divided into three different sections that are –theories supporting efficient market hypothesis (EMH); studies providing evidences from the stock market on the failure of EMH and studies on behavioral finance, discussing separately investors’ behavioral biases keeping in mind their effect on stock prices; and providing empirical evidences on the effect of investor sentiment on stock prices. Findings The review of literature from both the point of views has helped in understanding the market efficiency issue and changing dynamics of asset pricing approach. This is achieved by highlighting the gaps in the concept of market efficiency and also suggesting how these gaps can be bridged with a superior approach such as behavioral finance. Through further discussion of emerging trends in behavioral finance, the paper also points out gaps and how these can be abridged, for behavioral finance to be accepted as a mainstream alternative approach to EMH. Originality/value This is an extensive and one of a kind study that discusses market efficiency through discussion of EMH and behavioral finance side by side. With the help of such a study, researchers can precisely understand the need and can focus on the future course of action to make behavioral finance a mainstream approach to asset pricing.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 71 citations exist upstream.

References

1964CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1992The Cross-Section of Expected Stock Returns 1970EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK*1992Advances in prospect theory: Cumulative representation of uncertainty 1993Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency 1965The Behavior of Stock-Market Prices 1965The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets 1985Does the Stock Market Overreact?

Cited by

2024Behavioral finance impacts on US stock market volatility: an analysis of market anomalies 2021The Impact of Behavioral Biases on Herding Behavior of Investors in Islamic Financial Products 2022Exploring behavioural bias affecting investment decision-making: a network cluster based conceptual analysis for future research 2020COVID-19 and investor sentiment influence on the US and European countries sector returns 2022Examining Risk Absorption Capacity as a Mediating Factor in the Relationship between Cognition and Neuroplasticity in Investors in Investment Decision Making

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.