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E-BookEPUBePub WasserzeichenE-Book
402 Seiten
Englisch
UVK Verlagerschienen am30.01.20233rd edition
Over the last 50 years, neoclassical financial theory has been dominating our perception of what is happening in financial markets. It has spurred numerous valuable theories and concepts all based on the concept of Homo Economicus, the strictly rational economic man. However, humans do not always act in a strictly rational manner. For students and practitioners alike, our book aims at opening the door to another perspective on financial markets: a behavioral perspective based on a Homo Oeconomicus Humanus. This agent acts with limited rationality when making decisions. He/she uses heuristics and shortcuts and is prone to the influence of emotions. This sounds familiar in real life and can be transferred to what happens in financial markets, too.

Dr. Rolf J. Daxhammer is professor for Financial Markets at ESB Business School, Reutlingen University. His teaching and research interests are International Financial Markets, Investment Banking and Behavioral Finance. In his consulting work he is engaged in projects in Private Wealth Management und Financial Nudging, amongst others. Máté Facsar is Vice President Sales for Management Consulting & Professional Services Firms at FactSet, a global provider of integrated financial information and analytical applications. His close cooperation with Leaders in Asset and Wealth Management over the last decade enables him to monitor the application of Behavioral Finance and to address the challenges Portfolio Managers and Wealth Advisors face. Zsolt Papp, Managing Director, is a senior investment specialist in Global Fixed Income, Currency and Commodities group of J.P.Morgan Asset Management, a global leader in asset management services.. He has 30 years' experience in the financial industry in the UK and Switzerland on the sell-side and buy-side, with a special focus on emerging markets.mehr
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Produkt

KlappentextOver the last 50 years, neoclassical financial theory has been dominating our perception of what is happening in financial markets. It has spurred numerous valuable theories and concepts all based on the concept of Homo Economicus, the strictly rational economic man. However, humans do not always act in a strictly rational manner. For students and practitioners alike, our book aims at opening the door to another perspective on financial markets: a behavioral perspective based on a Homo Oeconomicus Humanus. This agent acts with limited rationality when making decisions. He/she uses heuristics and shortcuts and is prone to the influence of emotions. This sounds familiar in real life and can be transferred to what happens in financial markets, too.

Dr. Rolf J. Daxhammer is professor for Financial Markets at ESB Business School, Reutlingen University. His teaching and research interests are International Financial Markets, Investment Banking and Behavioral Finance. In his consulting work he is engaged in projects in Private Wealth Management und Financial Nudging, amongst others. Máté Facsar is Vice President Sales for Management Consulting & Professional Services Firms at FactSet, a global provider of integrated financial information and analytical applications. His close cooperation with Leaders in Asset and Wealth Management over the last decade enables him to monitor the application of Behavioral Finance and to address the challenges Portfolio Managers and Wealth Advisors face. Zsolt Papp, Managing Director, is a senior investment specialist in Global Fixed Income, Currency and Commodities group of J.P.Morgan Asset Management, a global leader in asset management services.. He has 30 years' experience in the financial industry in the UK and Switzerland on the sell-side and buy-side, with a special focus on emerging markets.
Details
Weitere ISBN/GTIN9783739805863
ProduktartE-Book
EinbandartE-Book
FormatEPUB
Format HinweisePub Wasserzeichen
FormatE101
Erscheinungsjahr2023
Erscheinungsdatum30.01.2023
Auflage3rd edition
Seiten402 Seiten
SpracheEnglisch
Dateigrösse9145 Kbytes
Artikel-Nr.10968719
Rubriken
Genre9201

Inhalt/Kritik

Inhaltsverzeichnis
Section 1: The Homo Economicus in the center of Traditional Finance
1. How Traditional Finance shaped the Rational Economic Man
2. Limitations of the traditional finance theory
Section II: Recurring speculative bubbles - triggered by the Homo Oeconomicus Humanus
3. Investor behavior from the perspective of Behavioral Finance
4. Speculative bubbles as a sign of market anomalies
5. Historical speculative asset price bubbles
Section III: Homo Oeconomicus Humanus in information and decision making processes
6. Phases of decisions making
7. Limited rationality in the perception of information
8. Limited rationality in the processing of information
9. Limited rationality in investment decisions
Section IV: Applications of Behavioral Finance and recent developments
10. Applications of Behavioral Finance in Wealth Management
11. Application of Behavioral Finance in corporate management
12. Financial Nudging - behavioral approaches for better financial decisions
13. Further development of Behavioral Finance - a look into the futuremehr
Leseprobe

Introduction

Thousands of business school students around the world are learning to assess the risks of investments and calculate expected returns using Harry Markowitz portfolio theory or William Sharpe s capital asset pricing model. The Swedish Nobel Committee has awarded many prizes for the underlying scientific achievements and the concepts and models of neoclassical capital market theory are widely used in the practice of portfolio managers and CFOs. What are these models based on? To what extent are they able to reflect reality? Can market participants (primarily buyers and sellers in the financial markets) really be expected to follow the concepts and models and to include them in their financial decisions?

The concepts and models of traditional economics illustrate what the majority of economists still assume: the existence of fundamentally efficient markets. According to this assumption, manias, panics, or crashes on the capital market cannot occur, at least not systematically, because markets react to new information efficiently and, thus, result in the best, pareto-efficient allocation of resources.

This view is increasingly questioned with the analysis of speculative bubbles in the second section of this book. The cryptocurrency hype in 2020/2021 as the latest major example of speculative market developments is an example of the existence of fundamental limits to rational markets. Thus, over the course of the centuries, time and again speculative bubbles developed, because the market participants fell into irrational exuberance and bought, for example, even when they could already guess that the speculative objects were clearly overvalued.

Over the past 40 years, Behavioral Finance research has produced numerous results according to which, when making financial decisions, we are guided by our emotions or simple rules of thumb rather than by strictly rational motives. Daniel Kahneman, one of the best-known researchers in the field of Behavioral Finance, received the Nobel Prize in 2002 for his insights into decisions under uncertainty. With the help of magnetic resonance tomographs, it was shown that the cerebellum is often the most active part of the brain when it comes to financial decisions - it is linked to emotions and connects us evolutionarily, for example, with reptiles. It is therefore not surprising that our brain occasionally takes shortcuts in order to be able to make decisions more quickly more easily.

Behavioral Finance is based on the insight that market participants are only capable of limited rational behavior due to psychological, mental, and neural limitations. This goes against the assumption of rationality in the theory of expected utility. The concept of widespread limited rationality is a central component and starting point of Behavioral Finance research. It also contradicts the assumption that even if there was limited rational behavior of a few individuals it would be neutralised due to the heterogeneity of market participants. Therefore, limited rationality should not be reflected in the market outcome. Rather, the proponents of Behavioral Finance expect a paradigm extension, which supplements the economic concepts and principles of neoclassical capital market theory with psychological, sociological, and neurological aspects.

The first section of this book is devoted to the behaviors expected from market participants within the framework of neoclassical theory. The study of the assumptions on which the individual concepts and models of neoclassical capital market theory are based is crucial in order to be able to apply them in the subsequent sections to classify and interpret the actual behavior of market participants.

The second section provides an overview of the development of Behavioral Finance as a new field of research in order to be able to interpret and explain the behavior of market participants (primarily investors on the financial markets). In the sense of the paradigm expansion mentioned above, doubts are growing as to whether the behavior of market participants can be explained using the traditional theory alone.

In the third section it is to be clarified how the market participant, in the person of the investor from the viewpoint of asset management, simplifies decisions by using heuristics. In addition, it will be discussed which influences leading to suboptimal decisions can have an impact on the investor in the decision-making process. In this context, the limited rational behavior of market participants is examined from the perspective of wealth management (financial advice for highnet-worth individuals) and, where appropriate, from the perspective of the private equity investment process. The focus is on the phases of decision-making. It is shown which heuristics are used by investors and investment advisors in the different phases of the decision-making process. The aim of the explanations given is to point out limited rational behavior by findings which, according to the current state of research, are responsible for the observable behavior of market participants. It should be expressly pointed out that Behavioral Finance research in this area in particular is subject to ongoing development.

The fourth and last section focuses on the application of the findings from Behavioral Finance in selected subject areas. The focus here is on investment advice in wealth management, the strategic decisions of corporate leaders and financial nudging. In addition, the fourth section will provide an outlook on future research directions and introduce new areas such as Neurofinance and Emotional Finance. These two research areas have already contributed to the investigation of the causes of limited rational behavior. They investigate amongst others processes that have so far been running unconsciously, such as emotions, fantasies, and fears. And they put them into the centre of financial market decisions.

The book is divided into a total of thirteen chapters. The following information provides a first overview of the topics covered and the contents conveyed.

In the first chapter, the decision theories and concepts of rational decision-making are at the forefront. After working through the chapter, you will learn about the development of economic perspectives, starting from classical economics to emotional finance. In the first subchapter you will be able to follow the ever-changing integration of psychology into economics. In addition to looking at the individual perspectives, you will learn about the fundamental decision theories and concepts of neoclassical capital market theory. Here, the focus is on the concept of homo economicus as well as on the behavioral patterns postulated based on neoclassical capital market theory. When studying the decision theories and concepts, you will recognize clear deviations from the actual behavior of market participants, which can increasingly be viewed as a motivation for a paradigm expansion through Behavioral Finance.

In the second chapter you will learn about the models of neoclassical capital market theory that are used to determine the expected return and the risk of securities. In addition, you will learn about the valuation approaches used in financial decisions based on fundamental and technical analysis. After working through this chapter, you will understand the increasing criticism of the listed models and you will also gain an insight into real market conditions that are difficult to reconcile with neoclassical capital market theory.

The third chapter is devoted to the Homo Economicus Humanus - the market participant who symbolizes the paradigm shift towards Behavioral Finance. As you work through this chapter, you will learn about the objectives and development of Behavioral Finance. On the other hand, you will get to know the market participant as an investor acting rationally only to a limited extent.

The fourth chapter focuses on speculative bubbles as signs of recurring and persistent market anomalies. In addition to the origin and causes of the formation of speculative bubbles, you will learn about the different phases and types of speculative bubbles. Furthermore, you will be able to classify the role of the herd instinct as the driving force of speculative bubbles in the structure of recurring market anomalies. Finally, you will encounter other significant capital market anomalies, some of which are short-lived, while others are medium- to long-term capital market anomalies.

The fifth chapter is devoted to historical speculative bubbles. After working through this chapter, you will know the most important speculative bubbles in the history of the financial markets and you will understand typical characteristics of the capital markets that can lead to turbulence. You will also be able to explain the development of historical bubbles based on the Kindleberger/Minsky five-phase model and you will apply it to current and future bubbles.

In the sixth chapter, you will learn the basis of the information and decision-making process and you will understand which perceptual disturbances can prevent market participants from absorbing and processing information. You will also learn the basis of decision-making from the perspective of Behavioral Finance: The Prospect Theory as the alternative to traditional expected utility theory. You will understand how, on the one hand, the S-shaped value function is used to describe the market participant s attitude to risk and,...
mehr

Autor

Dr. Rolf J. Daxhammer is professor for Financial Markets at ESB Business School, Reutlingen University. His teaching and research interests are International Financial Markets, Investment Banking and Behavioral Finance. In his consulting work he is engaged in projects in Private Wealth Management und Financial Nudging, amongst others.

Máté Facsar is Vice President Sales for Management Consulting & Professional Services Firms at FactSet, a global provider of integrated financial information and analytical applications. His close cooperation with Leaders in Asset and Wealth Management over the last decade enables him to monitor the application of Behavioral Finance and to address the challenges Portfolio Managers and Wealth Advisors face.

Zsolt Papp, Managing Director, is a senior investment specialist in Global Fixed Income, Currency and Commodities group of J.P.Morgan Asset Management, a global leader in asset management services.. He has 30 years' experience in the financial industry in the UK and Switzerland on the sell-side and buy-side, with a special focus on emerging markets.
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