A Slightly More Complex Behavioral Finance Model

2018 ◽  
pp. 49-70
Keyword(s):  
Behavioral Finance ◽  
Finance Model

Indian Behavioral Finance

2020 ◽  
Vol 9 (3) ◽  
pp. 54-67
Author(s):  
Vikas Pujara ◽  
Bhavesh P. Joshi
Keyword(s):  
Behavioral Finance ◽  
Driving Forces ◽  
Review Of Literature ◽  
Financial Decisions ◽  
Behavioral Psychology ◽  
Indian Context ◽  
Finance Model ◽  
Complex Procedure ◽  
The Difference ◽  
The Impact

Behavioral finance is a relatively new field of study that combines cognitive psychology and thoughts of leaders in economics, finance, and behavioral psychology to explore the driving forces behind the financial decisions that people make. Making a decision is a complex procedure that embraces cognitive and psychological biases. The paper attempts to explore and document the literature available to review the biases in an Indian context, highlighting specific and variable factors that impact, such as personality traits, and plausibly explain the difference in the behavior from a traditional behavioral finance model. The review of literature suggests that behavioral finance in an Indian context has a pattern, which can be followed to interpret and understand the psychology of Indian investors. A conceptual framework is proposed that considers various factors that can enable understanding Indian behavioral finance. In particular, the impact of personality and financial determinants appear to be imperative to studying behavioral bias in the Indian context.

BSV INVESTORS VERSUS RATIONAL INVESTORS: AN AGENT-BASED COMPUTATIONAL FINANCE MODEL

2006 ◽  
Vol 05 (03) ◽  
pp. 455-466 ◽  
Author(s):  
WEI ZHANG ◽  
YONGJIE ZHANG ◽  
XIONG XIONG ◽  
XI JIN
Keyword(s):  
Behavioral Finance ◽  
Dynamic Game ◽  
Mean Reversion ◽  
Computational Finance ◽  
Agent Based ◽  
Weak Evidence ◽  
Wide Range ◽  
Finance Model ◽  
Artificial Stock Market ◽  
Parameter Values

BSV (Barberis, Shleifer and Vishny [Journal of Financial Economics49 (1998) 307–343]) model is one of the three major behavioral finance models. The existing BSV model is about how behavioral investors form beliefs, and is able to produce both overreaction and mean-reversion for a wide range of parameter values. However, the assumption that all investors in the market must all be BSV investors is a little strict and remains controversial. In this paper, we present an agent-based computational model of the dynamic game between BSV investors and rational investors. Time series from the artificial stock market are analyzed and two interesting findings are reported. First, the introduction of rational investors will not eliminate the anomalies of overreaction and mean-reversion. Second, no evidence is found that the BSV investors will lose money to their counterparts although their cognitive bias makes them form a false kind of expectation. On the contrary, some weak evidence is reported that BSV investors are less likely to bankrupt.

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