Derivative trade optimizing model utilizing GP based on behavioral finance theory

Investments and Investment decision making come a long way in last few decades. The practical deviation from the established norms of conventional finance made the people know that the investors??buying behavior cannot be understood only by conventional finance theories. Studies strongly support the presence of behavioral aspects in the investment decision making process and behavioral finance provides solution to many-a-problems hitherto not answered appropriately by the conventional finance theory. Moreover, it was also propounded that the behavioral biases vary across gender and occupation of the investors. This study provides evidences for the existence of biases and also provides with the evidences that behavioral biases are not affected by the combined categories of gender and occupation.

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The Influence of Research Reports on Stock Returns: The Mediating Effect of Machine-Learning-Based Investor Sentiment

Discrete Dynamics in Nature and Society ◽

10.1155/2021/5049179 ◽

2021 ◽

Vol 2021 ◽

pp. 1-14

Author(s):

Xiaohong Shen ◽

Gaoshan Wang ◽

Yue Wang

Keyword(s):

Machine Learning ◽

Stock Returns ◽

Behavioral Finance ◽

Investor Sentiment ◽

Mediating Effect ◽

Machine Learning Method ◽

Mediating Role ◽

Finance Theory ◽

The Relationship ◽

The Empirical Analysis

This paper investigates whether and how the research reports issued by securities companies affect stock returns from the perspective of investor sentiment in China. By collecting research reports and investor comments from a popular Chinese investor community, i.e., East Money, we derive two indices that represent the information contained in research reports: one is the attention of research reports and the other is the average stock rating given by research reports; then we develop an investor sentiment indicator using the machine learning method. Based on behavioral finance theory, we hypothesize that research reports have a significant effect on stock returns and investor sentiment plays a mediating role in it. The empirical analysis results confirm the above hypotheses. Specifically, the average stock rating given by research reports can better predict future stock returns, and investor sentiment plays a partial mediating role in the relationship between stock rating and stock returns.

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EFIKASNOST FINANSIJSKIH TRŽIŠTA / EFFICIENCY OF FINANCIAL MARKETS

EMC Review - Časopis za ekonomiju - APEIRON ◽

10.7251/emc16066k ◽

2016 ◽

Vol 11 (1) ◽

Author(s):

Predrag Kapor

Keyword(s):

Financial Markets ◽

Behavioral Finance ◽

Stock Prices ◽

Global Financial Crisis ◽

Weak Form ◽

Efficient Market Hypothesis ◽

Strong Form ◽

The Status ◽

Finance Theory ◽

Available Information

Are financial markets efficient is a question on which there is still no clear and complete answer. Position that prices of securities fully reflect available information about securities is called the efficient market hypothesis (EMH). The EMH (on the example of stocks) has three forms (or levels) of efficiency: 1) the ‘’ weak’’ form of the EMH- is the claim that stock prices reflect all information contained in previous transactions; 2) the ‘’ semi- strong’’ form of the EMH- is the claim that stock prices reflect all publicly available information, and 3) the’’ strong’’ form of the EMH- is the claim that stock prices reflect all relevant information (public and private), including the privileged (the insider) information.Numerous studies have confirmed the existence of a’’ weak’’ form of the EMH, and generally supported the existence of a’’ semi-strong’’ form of the EMH, but not of a ‘’ strong’’ form of the EMH. However, the EMH, even if it is a ‘’weak’’ or a ‘’semi-strong’’ form has a number of weaknesses. Some of the the EMH assumptions confront with the reality – there is no perfect information, transaction and information costs can be significant, markets are often imperfect, and investors do not have complete knowledge about the set of all available financial strategies for a given situation.The information ’’overload’’ confuses people and affects their ability to prioritize and make good decisions. On the other hand, electronic trading method significantly affects the information at the disposal of the different market actors. It seems that the greatest threat to the EMH comes from the field of behavioral finance, which is engaged in research on the possible impact of psychological factors (loss aversion, anchoring, overconfidence...) on the behavior of investors. The basic argument of behavioral finance is that ’’standard’’ financial theory is not paying attention to how ordinary people make decisions and that ‘’ human factor’’ can not be ignored.Tha aim of this study was to critically examine the EMH. Apperently, the EMH after numerous studes and identified anomalies, largely remains at the level of (insufficiently confirmed) hypothesis, although it is often given the status, or created an illusion, of confirmed. This is also because the EMH is an important component of the rulling ’’paradigm’’ in finance or ’’standard finance theory’’. Joperdizing the status of the EMH bring into question many other important components of this ’’paradigm’’.The EMH has not offered acceptable answers to some of the specific developments and events in the financial market, including the last global financial crisis. But, the EMH still remains one of the cornerstones of ’’standard’’ finance theory.

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Investment Portfolios in an Emerging Economy: What Drives Portfolio’s Diversification?

EMAJ Emerging Markets Journal ◽

10.5195/emaj.2017.120 ◽

2017 ◽

Vol 7 (1) ◽

pp. 1-10

Author(s):

Pedro Luiz Albertin Bono Milan ◽

William Eid Jr.

Keyword(s):

Behavioral Finance ◽

Investment Decisions ◽

Personal Characteristics ◽

Emerging Economy ◽

Heterogeneous Database ◽

Risky Assets ◽

Investment Portfolios ◽

Finance Theory

This study sheds light on the investment portfolio’s decisions through behavioral insights. The study intends to identify personal characteristics that drive the level of diversification and lead investors to allocate resources in risky assets in an emergent economy, deepening the discussion about investment decisions and bringing some behavioral insights to the debate. The study has a unique and heterogeneous database of individual financial allocations from Brazil, one of the largest emergent economies. The characteristics of Brazilian investors play an important role in investment decisions, high educated and married investors tend to display diversified portfolios. To invest in risky assets, male investors have a 43% greater likelihood of investing in risky assets than females, highlighting the discussion on gender and investment decisions. Moreover, married investors tend to exhibit conservative portfolios. We observed that traditional investors are under-diversified, allocating primarily in traditional and safety assets. The results suggest that the investment decisions can be subject to psychological biases defined in behavioral finance theory.

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A STUDY OF THE INVESTMENT BEHAVIOR BASED ON BEHAVIORAL FINANCE

European Journal of Business and Economics ◽

10.12955/ejbe.v10i1.557 ◽

2015 ◽

Vol 10 (1) ◽

Cited By ~ 1

Author(s):

Yu Zhang ◽

Xiaosong Zheng

Keyword(s):

Research Methods ◽

Behavioral Finance ◽

Investment Strategy ◽

Investment Behavior ◽

Market Anomalies ◽

Behavioral Psychology ◽

Traditional Market ◽

Behavior Finance ◽

Finance Theory ◽

Selection Of

Behavior finance introduces psychology, sociology and other research methods into the study of investment behavior to explain how investors handle the information and take actions. This paper presents the literatures as theoretical solutions to the market anomalies of the traditional market theories. The behavioral psychology is examined through the study on the questionnaire of Chinese security investors. The results show that the investors are not always adopt rational behaviors as traditional finance theory assumed, but make a lot of irrational decisions based on individual cognitive and prejudices, even institutional investors often show the characteristic of irrational. In the guidance of the behavioral finance theory, the research will be closer to the reality and give more significant insight to the selection of investment strategy and psychology characteristic used to explain market anomalies.

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Behavioral Finance in Theory and Practice

Global Strategies in Banking and Finance - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-4666-4635-3.ch017 ◽

2014 ◽

pp. 254-271

Author(s):

Mustafa Okur ◽

A. Osman Gurbuz

Keyword(s):

Financial Markets ◽

Behavioral Finance ◽

Psychological Factors ◽

Rational Expectations ◽

Main Idea ◽

Efficient Market Hypothesis ◽

Theory And Practice ◽

Efficient Market ◽

New Approach ◽

Finance Theory

Behavioral finance is a new approach in finance literature. The main idea is that investors are not as rational as they are assumed to be. Therefore, financial markets could be better understood by using models that capture the effects of both rational and irrational investors. The critics of behavioral finance could be grouped into two main categories: limits of arbitrage and psychological factors. This chapter concentrates on both challenges and possible contributions of behavioral finance theory to the modern finance theory, which is mainly based on rational expectations theory and efficient market hypothesis.

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The Role of Psychological Factors in Behavioral Finance

Handbook of Research on Behavioral Finance and Investment Strategies - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-4666-7484-4.ch006 ◽

2015 ◽

pp. 94-115 ◽

Cited By ~ 6

Author(s):

Kijpokin Kasemsap

Keyword(s):

Behavioral Finance ◽

Psychological Factors ◽

Ambiguity Aversion ◽

Psychological Theory ◽

Global Finance ◽

Strategic Objectives ◽

Financial Decisions ◽

Belief Perseverance ◽

Finance Theory

This chapter introduces the role of psychological factors in behavioral finance, thus explaining the theory of behavioral finance, the application of behavioral finance theory, the empirical achievement in behavioral finance, the utilization of psychological factors in behavioral finance regarding beliefs (i.e., overconfidence, too much trading, optimism and wishful thinking, representativeness bias, conservatism bias, belief perseverance, anchoring, and availability bias) and preferences (i.e., prospect theory and ambiguity aversion). Behavioral finance is a comparatively new management field that seeks to combine behavioral and cognitive psychological theory with conventional economics and finance to provide descriptions for why people make unreasonable financial decisions. Psychological factors in behavioral finance hold out the expectation of a better understanding of financial market behavior and scope for investors to make better investment decisions. Applying psychological factors in behavioral finance will tremendously enhance financial performance and achieve strategic objectives in global finance.

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Economic Factors And Individual Investor Behavior: The Case Of The Greek Stock Exchange

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v20i4.2227 ◽

2011 ◽

Vol 20 (4) ◽

Cited By ~ 5

Author(s):

Anna A. Merikas ◽

Andreas G. Merikas ◽

George S. Vozikis ◽

Dev Prasad

Keyword(s):

Behavioral Finance ◽

Stock Exchange ◽

Investor Behavior ◽

Economic Factors ◽

Individual Investor ◽

Font Size ◽

Empirical Survey ◽

Athens Stock Exchange ◽

The Individual ◽

Finance Theory

This study undertook an empirical survey of the factors, which mostly influence individual investor behavior in the Greek stock exchange. The results revealed by our sample of 150 respondents confirm that there seems to be a certain degree of correlation between the factors that behavioral finance theory and previous empirical evidence identify as the influencing factors for the average equity investor, and the individual behavior of active investors in the Athens Stock Exchange (ASE) influenced by the overall trends prevailing at the time of the survey in the ASE.

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