THE IMPACT OF BEHAVIORAL FINANCE ON STOCK MARKETS

THE IMPACT OF BEHAVIORAL FINANCE ON STOCK MARKETS

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This article presents a new approach in the analysis of capital markets, namely behavioral finance.
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.Behavioralfinance is the study of the influence of the psychological factors on financial markets evolution.
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.Financial investors arepeople with a very varied number of deviations from rational behaviour, which is the reason why there is a variety ofeffects, which explain market anomalies.

Classical finance assumes that investors are rational and they are focused toselect an efficient portfolio, which means including a combination of asset classes chosen in such a manner as toachieve the greatest possible returns over the long term, under the terms of a tolerable level of risk.Behavioral financeparadigm suggests that investment decision is influenced in a large proportion by psychological and emotional factors