The Impeccable Behavioral Finance Assignment Help
The stocks and trading markets are essential components of any economy. They are not just places to make investment, or sale or purchase of varies equities rather stock markets are an indication of the overall health of an economic system and therefore it becomes immensely important to any government to keep the bullish spirit up in these markets.
Therefore, behavioral finance is that branch of economics that helps the economists to study the behavior and biases of investors and traders in the stock markets, and device the favorable economic policies accordingly. While pursuing a higher educational degree in the field of economics, many students are required to produce an assignment on the subject matter of behavioral finance.
If you are also assigned with some complicated assignment and are in search of a professional behavioral finance assignment help then you have found your rescuer. Livewebtutors is home to some of the best economics experts who will help you in accomplishing a behavioral finance assignment brilliantly.
The domain of behavioral finance is a complicated subject to undertake while studying. Behavioral Finance is an in depth study of the investment and decision making behavior of investors and traders that cast an influence on the performance of the stock markets.
The assessment of behavior inhibited by the investors helps the financial experts and economists to frame and draft policies of any government or a company accordingly so as to make them a bit resilient and prepared for any changes in the markets thereupon.
One crucial key aspect that helps the experts to understand the behavior of investment is the biases that the investors incur about the market while trading. To understand the field of behavioral finance better,
we enlist to you some prominent biases that influence the decisions of any investor and thus bring changes in the market accordingly:
- Confirmation Bias: This is one of the most common biases that affect the investment decision of any investor. An investor when under the confirmation bias is expected to accept only that information which supplements or supports his/her original position regarding any decision.
- For instance, if a person has invested in any stocks believing it to increase in price gradually, and if he/she hears any information that the stock he/she invested in might fall but will again rise in sometime. The investor will hold on to the positive aspect of the information that the prices will rise again as it confirms his/her original belief. Confirmation bias plays a crucial role in the market as it influences the investor significantly.
- Disposition Bias: This bias is a result of the uncertain trend of the stock markets and a seemingly short sighted vision of the investor. This phenomenon persuades an investor to sell of the equity as soon as it falls in the market, completely avoiding the estimates of its positive growth in the future.
- Disposition bias results in the frequent fluctuation in the market as the investors sell the equities earlier than expected. It is a strong bias and plays an important role in influencing the investors and traders in the market.
- Familiarity Bias: This constitutes to be the most prominent and common bias that many investors and traders face. This bias refers to a situation in which an investor only prefers to invest or buy stocks of the company on the absolute basis of some common familiarity.
- For instance, many investors restrict their trading to only the home stocks or in the stocks of the company belonging to their country of residence. Such bias results in restriction of trading and discourages an investor to tread the unknown waters. In this era of extensive globalization, such biases work against the grain of globalized economy and thus hampers the growth of a firm in a foreign land.
- Therefore, many firms while entering a new economy, device a strategy accordingly which promotes the local traders and investors to trade in the company’s stocks.
- Experiential Bias: It is also known as unintentional bias. This type of bias is extremely harmful for the stock markets. An experiential bias results in a situation where an investor if suffered a huge loss by trading in a particular company’s stocks will always restrain from investing in that firm ever, in spite of the current performance of the company.
- An experiential bias leaves a person hopeless and makes him vulnerable to the risks involved in the stock markets. This bias is extremely cautious to companies and they work on devising the strategy that helps in reviving the investor’s confidence.
Important Concepts to Write an Impactful Behavioral Finance Assignment:
Students often find the task of writing a perfect behavioral finance assignment challenging because of the lack of right knowledge about what constitutes as the important aspects to be included in an assignment. Therefore, Livewebtutors brings to you some of the crucial concepts involved in behavioral finance that will help you write an impactful assignment:
- Anchoring: It is the most common way adopted by the investors to decide about the stocks they must invest in. Anchoring is based on a highly thought out decision. When an investor or trader indulges in a lot of calculation, references, etc. in deciding about the investment, it is called anchoring.
- Anchoring, in simple terms, could be described as taking calculated steps at a time. In a perfect world, anchoring would have been the best way to make investment decisions. However the stock markets are not restricted by any means and thus anchoring is often proved to be harmful for the investor as many estimates are proven wrong in the actual transactions happening in the market.
- Mental Accounting: This is a noble theory devised by the Economist Richard H Thaler. According to this phenomenon, people place different values on money and this categorization results in a particular spending and investment behavior.
- Mental accounting helps the economists to study the financial behavior of a particular group of people. Due to mental accounting, people often make bad decisions while investing or trading in stock markets which eventually fluctuates the functioning of the market as expected.
- Gambler’s Fallacy: It is also known as the Monte Carlo Fallacy and is a part of the wider doctrine – the fallacy of the maturity of chances. As per this fallacy, an outcome is based up on the number of chances of events that it has occurred.
- For instance, if an investor invests according to the Gambler’s Fallacy, he/she might invest in stocks or equity which have face a number of downs in the recent past. The number of falls in its value has now presented a chance that the stocks will go up in the future. Many investors heavily rely on this fallacy to make their investment decisions.
- Herd Behavior: This is another classic bias that influences many investors and traders. According to this behavior, an investor is most likely to invest in the stocks or equities where his/her peers or acquaintances are investing. Also, herd behavior encourages the investor or trader to invest in the stocks that are witnessing a high demand in the market. Such influence makes the investor ignorant of any prior contemplation and he/she makes the decision purely getting influenced by the choices made by others.
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