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Behavioural Finance and the Decision to Invest in High Tech Stocks

Author

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  • Sian Owen

    (School of Banking and Finance, University of New South Wales)

Abstract

Recently, investment in high technology companies boomed as people invested large sums of money even when there was little chance of the company being profitable. This is contrary to classical beliefs that investors have rational expectations and maximise their utility. Instead we must consider the idea that people are irrational and make decisions for many reasons, few of which involve a judicious analysis of the available data. Some individuals are over-confident, whilst others copy the actions of previous investors. This paper attempts to explain why people invested in these companies and concludes that few, if any, investors are totally rational.

Suggested Citation

  • Sian Owen, 2002. "Behavioural Finance and the Decision to Invest in High Tech Stocks," Working Paper Series 119, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:wpaper:119
    as

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    File URL: http://www.finance.uts.edu.au/research/wpapers/wp119.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    behavioural finance; overconfidence; herd behaviour;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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