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Post Behavioral Finance Adolescence

Author

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  • DRIAN MITROI

    (FACULTY OF FINANCE, ACADEMY OF ECONOMICS BUCHAREST, ROMANIA , ROMANIA)

Abstract

The study of behavioral finance combines the investigation and expertise from research and practice into smart portfolios of individual investors’ portfolios. Understanding cognitive errors and misleading emotions drive investors to their long-term goals of financial prosperity and capital preservation. 10 years ago, Behavioral Finance was still considered an incipient, adolescent science. First Nobel Prize in Economics awarded to the study of Behavioral Economics in 2002 established the field as a new, respected study of economics. 2013 Nobel Prize was awarded to three economists, one of them considered the one of the founders of the Behavioral Finance. As such, by now we are entering the coming of age of behavioral finance. It is now recognized as a science of understanding investors behaviors and their biased patterns. It applies quantitative finance and provides practical models grounded on robust understanding of investors behavior toward financial risk. Financial Personality influences investment decisions. Behavioral portfolio construction methods combine classic finance with rigorously quantified psychological metrics and improves models for financial advice to enhance investors chances in reaching their lifetime financial goals. Behavioral finance helps understanding psychological profile dissimilarities of individuals and how these differences manifest in investment decision process. This new science has become now a must topic in modern finance.

Suggested Citation

  • Drian Mitroi, 2016. "Post Behavioral Finance Adolescence," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 206-218, December.
    • Handle: RePEc:cbu:jrnlec:y:2016:v:1special:p:206-218
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    References listed on IDEAS

    as
    1. Ion Stancu & Dumitra Stancu, 2013. "Rationality Versus Irrationality On The Romanian Capital Market," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(Special I), pages 325-332, March.
    2. De Bondt, Werner F M & Thaler, Richard H, 1989. "A Mean-Reverting Walk Down Wall Street," Journal of Economic Perspectives, American Economic Association, vol. 3(1), pages 189-202, Winter.
    3. repec:agr:journl:v:3(580)(supplement):y:2013:i:3(580)(supplement):p:325-332 is not listed on IDEAS
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