Economics, Econometrics and Finance
4 years ago

Investors' Emotions Drive Stock Market Decisions, Not Rationality.

MPRA Paper
Decision Making in the Stock Market: Incorporating Psychology with Finance
Abhijeet Chandra

Paper Summary

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Stock Market Predictions

Individual investors don't always make rational decisions when investing in the stock market. Their choices are often influenced by emotions like greed and fear, as well as cognitive biases. This can lead to suboptimal investment decisions. To address this, finance professionals should consider these behavioral factors as risks when creating investment strategies. By understanding how investors perceive risk and incorporating behavioral issues into decision-making, advisors can help improve investment outcomes and build investor confidence in the stock market.