Behavioral Finance: Limited Rationality in Financial Markets, 3rd Edition

Order Cheap Tramadol Online Table of Content Preface 3rd Edition Dedication Introduction Section I − The Homo Economicus in the center of Traditional Finance 1 How Neoclassical Theory shaped rational economic behavior 1.1 From Traditional Finance to Emotional Finance 1.2 Classical theories of Traditional Finance 1.2.1 The rational economic market participant according to Smith 1.2.2 Random Walk Theory according to Bachelier 1.2.3 Expected Utility Theory according to von Neumann & Morgenstern 1.2.4 Information processing according to Bayes 1.2.5 Efficient Market Hypothesis according to Fama Summary Chapter 1 2 Limitations of Traditional Finance 2.1 Models of Neoclassical Capital Market Theory 2.1.1 Portfolio Selection Theory 2.1.2 Capital Asset Pricing Model (CAPM) 2.1.3 Arbitrage Pricing Theory as an alternative to CAPM 2.2 Valuation methods as a basis for financial decisions 2.2.1 Fundamental Analysis 2.2.2 Technical Analysis 2.3 Old vs. new reality ￢ﾀﾒ the Black Swan Summary Chapter 2 Concluding remarks Section I Section II ￢ﾀﾒ Recurring speculative bubbles ￢ﾀﾒ triggered by the Homo Economicus Humanus 3 Investor behavior from the perspective of Behavioral Finance 3.1 Starting point and objective of Behavioral Finance 3.1.1 Evolving concept of rationality 3.1.2 Departure from the Expected Utility Theory ￢ﾀﾒ Bounded Rationality 3.2 Change of perspective within the framework of Behavioral Finance 3.2.1 Comparison of neoclassical and behavioral capital market theory 3.2.2 Research methods of Behavioral Finance 3.2.3 The investor in the course of time Summary Chapter 3 4 Speculative bubbles as a sign of market anomalies 4.1 Causes of speculative bubbles and their intensification 4.1.1 Herding 4.1.2 Limits of arbitrage 4.2 Anatomy of speculative bubbles according to Kindleberger & Minsky 4.3 Detailed review of bubbles and market anomalies 4.3.1 Significance of speculative bubbles for economies 4.3.2 Types of speculative bubbles 4.3.3 Types of capital market anomalies Summary Chapter 4 5 Speculative bubbles from the 17th to 21st century 5.1 Benoit Mandelbrot’s market characteristics 5.2 Examples of significant speculative bubbles 5.2.1 The Tulip Mania of 1636 5.2.2 The Mississippi bubble of 1716 5.2.3 The stock market boom and crash of 1929 5.2.4 The dot-com speculative bubble of the late 1990s 5.2.5 The U.S. real-estate credit bubble between 2001 and 2006 5.2.6 Speculative bubbles after the U.S. mortgage crisis 5.3 Indications of speculative bubbles in Private Equity Summary Chapter 5 Concluding remarks Section II Section III – The Homo Economicus Humanus within the information and decision-making process 6 Information and Decision-Making Process 6.1 Phases of the information and decision-making process 6.1.1 Information perception 6.1.2 Information Processing/Evaluation 6.1.3 Investment Decision 6.2 Basis of decision-making from the perspective of Behavioral Finance 6.2.1 Decision-making based on Prospect Theory 6.2.2 Features of the valuation functions 6.2.3 Valuation of securities based on the Prospect Theory Summary Chapter 6 7 Limited rationality during information perception 7.1 Heuristics of cognitive origin 7.1.1 Misperception of probabilities 7.1.2 Misinterpretation of information 7.2 Heuristics of emotional origin 7.3 Assessment of the risk/return-harmfulness of reviewed heuristics Summary Chapter 7 8 Limited rationality during information processing 8.1 Heuristics of cognitive origin 8.1.1 Misperception of probabilities 8.1.2 Misperception of information 8.1.3 Misperception of objective reality 8.1.4 Misperception of one’s own abilities 8.2 Heuristics of emotional origin 8.3 Assessment of the risk/return-harmfulness of the heuristics considered Summary Chapter 8 9 Limited rationality during decision-making 9.1 Heuristics of cognitive origin 9.1.1 Misperception of objective reality 9.1.2 Misperception of own abilities 9.2 Heuristics of emotional origin 9.2.1 Misperception of objective reality 9.2.2 Misperception of one’s own abilities 9.3 Assessment of the risk-/return-harmfulness of the considered heuristics 9.4 Overview of the heuristics considered in the information and decisionmaking process Summary Chapter 9 Concluding remarks Section III Section IV – Applications of Behavioral Finance and Recent Developments 10 Applications of Behavioral Finance in Wealth Management 10.1 Overview of limited rational behavior in investment advice 10.2 Dealing with heuristics in investment advice 10.2.1 Applied heuristics during information perception 10.2.2 Applied heuristics during information processing 10.2.3 Applied heuristics during decision-making Summary Chapter 10 11 Application of Behavioral Finance in corporate governance 11.1 Overconfidence in entrepreneurial investment decisions 11.2 Dividend policy from the perspective of Behavioral Finance 11.3 Initial Public Offerings from the perspective of Behavioral Finance 11.4 Corporate Governance from the perspective of Behavioral Finance 11.5 Equity Premium Puzzle Summary Chapter 11 12 Financial Nudging ￢ﾀﾒ behavioral approaches for better financial decisions 12.1 Libertarian Paternalism 12.1.1 Choice architecture 12.1.2 Freedom of choice and paternalism 12.1.3 Types and characteristics of nudging 12.1.4 Criticism of libertarian paternalism 12.2 Financial nudging approaches 12.2.1 Behavioral science foundations of financial nudging 12.2.2 Personal Loans 12.2.3 Credit Cards 12.2.4 Mortgages 12.2.5 Pension provisions 12.2.6 Shares and bonds Summary Chapter 12 13 Further development of Behavioral Finance ￢ﾀﾒ a look into the future 13.1 Limits of Behavioral Finance 13.2 Emergence of Neurofinance/Neuroeconomics 13.2.1 Research on the human brain 13.2.2 Decision processes from the perspective of Neurofinance 13.3 Origin of Emotional Finance 13.3.1 Emotions as a basis for investment decisions 13.3.2 Interpretation of market movements from an Emotional Finance perspective Summary Chapter 13 Concluding remarks Section IV Glossary Literature Books Journals and Essays Websites Biographies Index