Behavioral Finance: Finance with Normal People
By M. Statman. 2014
183 citations recorded by the source corpus.
Behavioral finance is under construction as a solid structure of finance. It incorporates parts of standard finance, replaces others, and includes bridges between theory, evidence, and practice. Behavioral finance substitutes normal people for the rational people in standard finance. It substitutes behavioral portfolio theory for meanvariance portfolio theory, and behavioral asset pricing model for the CAPM and other models where expected returns are determined only by risk. Behavioral finance also distinguishes rational markets from hard-to-beat markets in the discussion of efficient markets, a distinction that is often blurred in standard finance, and it examines why so many investors believe that it is easy to beat the market. Moreover, behavioral finance expands the domain of finance beyond portfolios, asset pricing, and market efficiency and is set to continue that expansion while adhering to the scientific rigor introduced by standard finance.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/684e972bff5868b5baa67d3a2a2ececb9416d3ad
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Citations in the corpus
- Investor sentiment and stock return volatility: Evidence from the Johannesburg Stock Exchange (2019, background): “It also implies that the traditional asset pricing models such as the capital asset pricing model (Linter, 1964; Sharpe, 1964) are replaced by behavioural asset pricing models (Statman, 2014).”
- Environmental, Social and Governance (ESG) and Investment Decision in Bangladesh (2018, background): “In BAPM, the utilitarian, expressive and emotional benefits are included, and it states that the value of the investment or expected return of the stock depends on risks, social responsibility, liquidity, thrill, prestige, misleading emotions, cognitive errors, and so forth [73].”