Finance forum: Behavioural finance


“Behavioural finance” is a sector of economics and neuro-economics that deals with financial decision-makers from a specific perspective. The thing is, market actors don’t always make rational decisions, both because of the lack of complete information in a situation and because of crucial factors stemming from emotional interactions. Behavioural finance has to do with identifying the constants of human behaviour that are due to these factors – with the aim of providing analyses and predictive models for these behaviours.


The young and the reckless: high risk investing on the rise

Posted on 26.03.2021

The FCA’s recent report on investing trends among young investors has revealed alarming levels of risk-taking. Young and newbie investors are increasingly getting involved in cryptocurrencies, forex, and meme-stocks hoping to generate rapid profits while ignoring the risks involved. The research carried out by the Financial Conduct Authority claims there are clear signs such high-risk investing is not suitable for the general public. According to the study, 59% of respondents claimed ...

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How does emotional investing lead to losses?

Posted on 11.03.2021

Anyone who has followed the news in the last couple of months knows retail trading is on the rise. Retail trading is normally associated with emotional investing - something that eventually leads to losses for many. In the current environment, overvalued stocks and rising cryptocurrencies have attracted many retail investors who don't want to miss out.  In general, emotional investing can cost an investor about 3% in annualized losses in the long run. With ...

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The January Effect: Investor (Over) Confidence and the Making of Market Bubbles

Posted on 08.02.2021

2021 has officially kicked off and with it comes a predictable phenomenon: The January Effect. What is it, and is it helpful or harmful? What is the January effect? The “January Effect” is a seasonal buying/selling pattern that occurs every year. It begins in mid- to late December when investors dump their losses for tax breaks, pushing prices down. Low December prices, in turn, attract January buyers, which then drives stock prices up. Some analysts explain that the buyi ...

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