Received: 1 July 2019 Accepted: 2 July 2019

DOI: 10.1002/pa.1996

PRACTITIONER PAPER

Behavioral finance and portfolio management: Review of

theory and literature

Anu Antony

Rajagiri College of Social Science, Rajagiri

Valley Campus, Kakkanad, Kochi, Kerala, Crowd psychology and cognitive biases are the outcomes of irrational behaviors.
682039, India
Identifying the irrationality in the behavioral patterns can reduce the market anoma-
Correspondence lies that we are facing in the stock market operations. Researchers have developed
Anu Antony, Assistant Professor, Rajagiri
the behavioral portfolio model, which is a prescriptive model by incorporating the
College of Social Science, Rajagiri Valley
Campus, Kakkanad, Kochi, Kerala . PIN : behavioral biases. The model was developed as an extension of capital asset pricing
682039, India.
model. The behavioral portfolio model explains why the investors invest with multi-
Email: anuantony@rajagiri.edu
ple objectives such as future requirement of family, retirement saving, and fund for
meeting emergency. Application of behavioral finance will help in policy making pro-
cess by designing optimum portfolio and strategies to minimize the risk by controlling
the emotions of the investors.

JEL CLASSIFICATION
G4; G190; G100; G110

1 | I N T RO D UC T I O N Behavioral finance is an academic field that applies behavioral

concepts to the portfolio investment. It is an interdisciplinary
Behavioral finance examines the impact of psychology on market par- approach that incorporates insights from economics, psychology, and
ticipants' behavior and the resulting outcomes in markets, focusing on sociology. However, in traditional financial theory, investors are con-
how individual investors make decisions: in particular, how they inter- sidered to tend towards risk aversion at all times (Chou, Huang, &
pret and act on specific information. Cognitive biases and affective Hsu, 2010).
(emotional) aspects always contributed towards the decision making, There are mainly two theories relating the investors' behavioral
which is considered as irrational behavior. The researchers have aspects:
coined the irrational behavior into two groups: theory of cognitive
bias (Festinger, 1957) and prospect theory (Kahneman & Tversky, 1 Standard finance/Expected utility theory
1979). The cognitive theory postulates that behavior of an individual 2 Behavioral finance/Prospect theory.
is determined by his or her own mind, that is, contemplation and self-
perception determine both behavior and emotions (Beck, 2011). On Standard finance is a prescriptive theory built by Markowitz in
the other hand, the prospect theory describes how investors perceive 1952. Standard finance is the body of knowledge built on the pillars
profit and loss. Value function was developed from prospect theory of the arbitrage principles of Miller and Modigliani, the portfolio prin-
based on experiments and empirical investigations (Kahneman & ciples of Markowitz, the capital asset pricing theory of Sharpe, Lintner,
Tversky, 1979). The value function states that people view gains and and Black, and the option pricing theory of Black, Scholes, and Merton
losses differently and loss makes a greater emotional impact on inves- (Statsman, 1999). Standard finance theory is designed to provide
tors than gain. mathematically elegant explanations of financial questions that are
In the modern finance theory, behavioral finance is a new often complicated. These approaches consider markets to be efficient
paradigm, which seeks to appreciate and expect systematic financial and are highly analytical and normative. And the theory focuses on
market influence of psychological decision making (Olsen, 1998). wealth maximization.

JJ Public Affairs. 2019;e1996.

Public Affairs. 2020;20:e1996. wileyonlinelibrary.com/journal/pa
wileyonlinelibrary.com/journal/pa ©
© 2019
2019 John
John Wiley
Wiley &
& Sons, Ltd.
Sons, Ltd. 1
1 of
of 7
7
https://doi.org/10.1002/pa.1996
https://doi.org/10.1002/pa.1996
2 of 7
2 of 7 ANTONY
ANTONY

Prospect theory is a mathematically formulated alternative to the 2 | E V O L U T I O N OF BE H A V I O R A L F I N A N C E

theory of expected utility maximization. The utility theory offers a
representation of truly rational behavior under certainty. According to Behavioral finance has a long and checkered history. It existed since
the expected utility theory, investors are risk averse. Risk aversion is the end of the 19th century but emerged as a separate discipline
equivalent to the concavity of the utility function, that is, the marginal towards the last quarter of 20th century. The brief details about the
utility of wealth decreases. Every additional unit of wealth is valued evolution and development of behavioral finance extracted from the
less than the previous equivalent increase in wealth. Despite the obvi- book Behavioral Finance (Sulphay, 2011, pp. 46–48) were articulated
ous attractiveness of this expected utility theory, it has long been in Table 1.
known that the theory has systematically failed to predict human The references mentioned in Table 1 were only about a few works,
behavior, at least in certain circumstances. Kahneman and Tversky and there were large number of other works by experts, economists,
present in “Prospect Theory” (1979) the following experimental evi- and cognitive and social psychologists who have enriched the disci-
dence to illustrate how investors systematically violate the utility the- pline through their contributions. However, the social psychologist
ory, shown in Figure 1. has categorized the cognitive behavior into crowd psychology and
Kahneman and Tversky defined the value function on gains and group behavior within the stock market. Behavioral finance theories
losses, rather than on total wealth. It is found that the graph is con- were based on cognitive psychology that suggests that the decision
cave in the domain of gains and convex in the domain of losses. The making processes are subject to several cognitive illusions. The pros-
graph is considerably steeper for losses than for gains. The graph also pect theory grouped the cognitive illusions into two groups: illusion
shows that human mind gives a loss of X units more importance than based on heuristic decision making process and illusion caused by
for a gain of X units. In short, human mind accepts a sure gain even adoption of mental frames. The literature provides sufficient evidence
when the expected value of the gain is considerably more. As loss has regarding the relationship of behavioural factors and investment deci-
more value, an investor will take gamble with more expected loss sion making (Pasewark & Riley, 2010; Ricciardi & Simon, 2000;
instead of a sure loss. Kahneman and Tversky found that people are Statsman, 1999).
risk lovers for losses and risk averse for gains.
Thaler, Barberies, and Richard (2003) considered prospect theory
3 | B E H A V I O R A L P O R T F O L I O SE L E C T I O N
as the most successful tool in capturing experimental results. They
AND MANAGEMENT
argued that prospect theory should not be considered as a normative
theory in finance: It only tentatively seeks to capture people's behav-
Markowitz's portfolio theory may establish a deterministic model for
ior in preferring risky gambles. Thaler (2000) also regarded prospect
optimal asset and portfolio allocation. But it does so under a highly
theory as an excellent example of a behavioral economic theory
unrealistic set of behavioral assumptions. For each individual client,
because it integrates the theoretical components of finance with sev-
investment decision making is based as much on perceptions, atti-
eral important psychological features.
tudes, belief, and experience as on economic criteria. Antonides and
Many of the behaviors of investors are the outcomes of prospect
Van Der Sar (1990) stress that “Individual investment decision making
theory. The theory describes how people frame and value a decision
can be seen as the outcome of the confrontation between expecta-
under uncertainty. Initially, the investors frame the choices in terms of
tions and preferences, given the restrictions imposed by the budget
potential gains and losses by keeping a reference point.
and the market. Our information and beliefs determine the possible
outcomes foreseen and their subjective probabilities, and our wants
or desires determine the values or utilities of the possible outcomes
After all, the perception of economic phenomena is governed by psy-
chological factors.”
Diversification and risk management techniques are crucial con-
cepts in the portfolio theory. However, the prior studies proved that
the overconfident investors hold undiversified portfolio, as they are
confident in the abilities. Most of the investors fail to diversify as they
determine risks at individual asset level instead of comparing at the
portfolio level (De Bondt, 1998). Psychologists found that the invest-
ment decisions are influenced by psychological and emotional factors.
A better understanding of these factors will help in defining an opti-
mum portfolio by selecting the best investment options (Chira &
Thornton, 2008; Iman, 2011).
Behavioral portfolio theory (BPT) emphasizes the role of behav-
ioral preference in portfolio selection and the investors' investment
FIGURE 1 Kahneman and Tversky's value function avenue (Shefrin & Statsman, 2000). It shows the interdependence of
ANTONY
ANTONY 3
3 of
of 7
7

TABLE 1 Evolution of behavioral finance

Year Author
1895 Gustav Le Bon Gustav Le Bon was the French psychologist
and author of The Crowd: A Study of the
Popular Mind. This book remains the first
ever and greatest material about
traditional behavior written in
psychology. He incorporated the theories
of herd behavior and crowd psychology
in the individual behavior (Gustave,
1895).
1912 GC Selden The Psychology of the Stock Market,
authored by GC Seldon, was a brilliant
piece of literature that presented the idea
that stock price movements were based
on the mental attitude of the investors
and traders in stock market investment
(Selden, 1912).
1951 Burrell “The Possibility of Experimental Approach
to Investment Analysis” (Burrell, 1951).
This was an article published in the
Journal of Finance that postulates the
scientific approach on investment
decisions. The article narrates the human
behavioral pattern in stock market
operations and its reflection.
1957 Festinger Leoan A Theory of Cognitive Dissonance (Festinger,
1957). It was a book published under the
discipline of social psychology that
introduces the concept of cognitive
dissonance.
1973 onwards Kahneman and Tversky They together published a series of article
introducing new theories and concepts
that help the Journal of Behavioral Finance
to evolve as a new discipline. Some of
their concepts and their prominent
articles are listed below:
Heuristics:
• (Kahneman & Tversky, “Availability: A
Heuristic for Judging Frequency and
Probability,” 1973, pp. 207–232)
• (Kahneman & Tversky, “Judgement Under
Uncertainty: Heuristics and Biases,”
1974, pp. 1124–1131)
Prospect theory:
(Kahneman & Tversky, “Prospect Theory:
An Analysis of Decision Under Risk,”
1979, pp. 263–291)
Mental accounting and framing:
(Tversky & Kahneman, “Rational Choice and
the Framing of Decisions,” 1986, pp.
251–278)
(Kahneman & Tversky, “Advances in
Prospect Theory: Cumulative
Representation of Uncertainty,” 1992, pp.
297–323)
Hot hands:
(Tversky & Gilovich, “The Hot Hand:
Statistical Reality or Cognitive Illusion?,”
1989)
(Continues)
4 of 7
4 of 7 ANTONY
ANTONY

TABLE 1 (Continued)

Year Author
1985 WFM De Bondt and Richard Thaler They introduced the concept “over
reaction,” which was explained as the
tendency that can led to disproportionate
reaction to certain news in market (De
Bondt & Thaler, 1985). In this work, they
tried to analyze the market efficiency
because of overreaction.
1985 H Shefrin and M Statsman “The Disposition to Sell Winner Too Early
and Ride Looser Too Long: Theory and
Evidence” (Shefrin & Statsman, 1985).
This article was published in the Journal
of Finance, established that investors
have tendency to hold on to the losers
and sell winner, and thus introduced the
concept “regret aversion.”
1998 R Olsen “Behavioral Finance and Its Implication for
Stock Price Volatility.” In 1998, this
article was published in Finance Analysts
Journal, where a comprehensive depiction
of the foundation and justification
underlying behavioral finance were
presented (Olsen, 1998).
2000 RJ Shiller “Irrational Exuberance,” through which he
introduced the concept of anchoring
(Shiller, 2000).
2000 Shefrin and Statsman “Behavioral Portfolio Theory” was an
extension of capital asset pricing model
and was introduced by Shefrin and
Statsman (2000). Through this, they
introduced the concept of portfolio
theory by incorporating behavioral
factors.
2009 J Fernandes, JI Pena, and T Benjamin Fernandes, Pena, and Benjamin (2009)
classified behavioral bias into cognitive
bias and emotional bias in the work
“Behavioral Finance and Estimation of
Risk in Stochastic Portfolio Optimization.”

Source: (Sulphay, 2011).

crowd psychology and behavioral decisions. BPT explains why the The first aspect of portfolio management is to identify the invest-
investors invest with multiple objectives such as future requirement ment strategy. That is whether an investor prefers fundamental analy-
of family, retirement saving, and fund for meeting emergency. Gra- sis, technical analysis, or personal intuition. Investors using
ham, Harvey, and Huang (2009) found the significance of demo- fundamental analysis examine relevant factors such as balance sheets,
graphic variable while designing the investors' preference in designing profit or loss statements, return on investments, dividends, and indus-
portfolio. From the previous literature review, the following biases are try conditions that affect the future stock price movements. In con-
important in determining the portfolio selection and evaluation: trast, investors relying on technical analysis only study the past stock
price movements, believing that historical data provide indications for
1 probability weighting and anchoring (reference point; Kahneman & future stock price developments. This stage can identify the reference
Tversky, 1979); point set by the investor (anchor; Shleifer & Summers, 1990).
2 mental accounting (Mullainathan & Thaler, 2000); Investment objectives were embedded in the investors' prefer-
3 representative biases; ences. A key implication of BPT is that investors whose goals involve
4 lack of diversification (Goetzmann & Kumar, 2008); and high aspirations act as if they have a high tolerance for risk, implying
5 insufficient savings due to lack of self-control (Benartzi & Thaler, that investors who set high aspiration levels in combination with an
2007). associated high probability of achieving those levels will tend to
ANTONY
ANTONY 5
5 of
of 7
7

choose risky portfolios (Shefrin & Statsman, 2000). Risky portfolios

were portfolios that are more exposed to market risk and overweight
small firms (Barber & Odean, 2001).
Shanmugham and Ramya (2012) reported that psychological and
sociological factors dominate economic factors in investment decision
making process. They apply theory of reasoned action and theory of
planned behavior to explain individual investor behavior. Waweru,
Munyoki, and Uliana (2008), Evans (2006), and Kahneman and
Tversky (1979) show that investment decisions were guided and
affected by psychological, emotional, and behavioral factors. The
behavioral framework links investments objectives to trading behav-
ior. In this regard, investors saving for retirement or building a finan-
cial buffer and investors who invest to speculate or exercise a hobby
lie at opposite ends of a continuum (Barberis & Xiong, 2008; Grinblatt
& Keloharju, 2006). To experience these positive emotions, such
investors will trade more frequently than other investors.
The following literature provides sufficient evidence regarding the F I G U R E 2 Pyramid structure.
relationship of behavioural factors and investment decision making Source: Wall (1993)
(Pasewark & Riley, 2010; Ricciardi & Simon, 2000; Statsman, 1999).
These studies were conducted on different types of investors such as in their decision making process. It shows the effect of various market
individual, groups, and institutions. factors that affect the investment decision process and the strategies
Arvid Hoffmann et al. (2010) analyzes how systematic differences used to evaluate such market factors. Strategy is fundamentally about
in investors' investment objectives and strategies have an impact on choice, a commitment to undertake one set of actions rather than
the portfolios they select and the returns they earn. On the basis of another for choice in the face of trade-offs (Porter, 1996). DeBondt
the findings from behavioral finance, they developed hypotheses that and Thaler (1995) state that the financial market influences the inves-
were tested using a combination of transaction and survey data tors' behavior. They pointed out that the investors may have over- or
involving a large sample of online brokerage clients. By testing the under-reaction to price changes that extrapolate past trend to future
hypothesis, they found that investors who rely on fundamental analy- and focuses on seasonal price cycles. Waweru et al. (2008) identify
sis have higher aspiration and turnover. They will take more risk, are that the factors of market have impact on investors' decision making.
more overconfident, and outperform investors who rely on technical The study states that price changes, past trends of stocks, market
analysis. And these findings provide support for the behavioral information, and other fundamental aspects of underlying stock will
approach to portfolio theory and shed new light on the traditional affect the decision making of an investor. Carparrelli, Arcangelis, and
approach to portfolio theory. Cassuto (2004) show the impact of herding that affects the decision
making of the investors. In general, market factors are the external
factors influencing the decision making process. The various strategies
3.1 | Investment preference and investment
used by investors to evaluate the market factors are considered as
strategies
investment strategies/tools of the investors. Some of the investment
Individual investors are especially prone to heuristic-driven bias. The tools (strategies) used by the investors were summarized below:
findings of De Bondt (1998) were (a) investors were excessively opti-
mistic about the future performance of investment they owned; (b) 1 Financial statement analysis: It is considered as a quantitative indi-
they were overconfident; (c) their stock price forecasts were anchored cator used to comprehensively evaluate the financial aspects of
on past performance; and (d) they underestimated the degree to the firm. At the company level, financial statement analysis is the
which their stock moved in tandem with the market, that is, they part of fundamental analysis dealing with examination of financial
underestimate beta. data to evaluate the intrinsic value of the securities. Bennet,
Wall (1993) exhibits a pyramid structure (Figure 2) to address the Selvam, Ebenezer, and Karpagam (2011) and Quershi and Hunjra
investors' preference associated with security, potential, and aspira- (2012) explained in their study the significance of financial tools in
tion. The movement from bottom to top involves more risky asset, decision making of the investors. Khanifar, Jamshidi, and
and the movement from right to left involves higher yield. At the bot- Mohammadinejad (2012) found that financial statements and mid-
tom of the pyramid are securities designed to provide investor with term reports are considered more important than economy market
safety. and industry-related factors by analysts at Tehran Stock Exchange.
An investment strategy refers to various heuristics used by inves- 2 Corporate social regulations: According to Bennet et al. (2011), fac-
tors to evaluate their investment avenue for their investment. Analyz- tors influencing stock selection decision are fundamental, market
ing the investment strategy refers to how investors differ from others factors, earning, decision making, industry-related corporate
6 of 7
6 of 7 ANTONY
ANTONY

governance, positioning, image building, goodwill, and industry practitioners, financial planners, and advisors were interested to the
competition factors. It shows the socially responsible characteristic psychological biases of their investors in order to solve persistent
of investing dealing with nonfinancial consideration. The studies of problem faced in the stock market. This will help to reduce the anom-
Ghoul, Guedhami, Kwok, and Mishra (2011) and Godfrey, Merrill, alous evidence of the stock market operations.
and Hansen (2009) state that corporate responsible behavior of Behavioral finance is a complement to standard finance theories.
the firm reduces risk and decreases cost of capital (Bassen, Meyer, BPT was formulated on the basis of underlying principle of capital
& Schlange, 2006). This increases the investors' confidence on asset pricing model. The behavioral portfolio model will give prescrip-

investment. tive approach by incorporating crowd psychology and group behavior.

3 Technical analysis is the tool and technique used to study the price Practitioners can comprehend the mistakes generally made by their

and the volume movement of the securities to predict the future clients and to provide insight and self-control in their decisions.

price. When the fundamental analysis deals with the intrinsic value
of the securities based on investors' estimation, technical analysis
deals with price fluctuations. Lo, Mamaysky, and Wang (2000) OR CID

state that the general goal of technical analysis is to identify and

Anu Antony https://orcid.org/0000-0002-1793-4809
extract the price pattern. The tools such as charting, daily price
fluctuations, and trading volume were used in technical analysis.
The visual summary of technical analysis provides forecast of secu-
RE FE RE NCE S
rity prices regarding the investment decision of buy or sell
(Edwards, Magee, & Bassetti, 2007). Antonides, G., & Van Der Sar, N. L. (1990). Individual expectations, risk
perception and preferences in relation to investment decision making.
4 Opinion analyst explains the herding effect of the investors to fol-
Journal of Economic Psychology, 11, 227–245. https://doi.org/10.
low others' actions. The effect of herd affect is due to the inves- 1016/0167-4870(90)90005-T
tors' tendency to extract useful and reliable information. It is a Arvid Hoffmann, O. I., Hersh, S., & Joost ME, P. (2010). Behavioral portfo-
trust heuristic and a nonconventional tool used by the investors in lio analysis of individual investors. Working paper. Maastricht Univer-
sity and Santa Clara University.
their decision making process. Investors tend to seek advices from
Barber, B., & Odean, T. (2001). Boys will be boys: Gender, overconfidence
the experts because of asymmetries of information. The recom- and common stock investment. Quarterly Journal of Economics, 116,
mendations given in the financial experts and updates in print 261–292. https://doi.org/10.1162/003355301556400
media help the investors in their decision making (Monit, Pelligra, Barberis, N., & Xiong, W. (2008). Realisation utility. NBER Working Paper
No 14440.
Martingnon, & Berg, 2014).
Bassen, A., Meyer, K., & Schlange, J. (2006). The influence of corporate
responsibility on the cost of capital: An empirical analysis. Retrieved
While analyzing the character of the investors, it is evident that from Schlange & Co website: https://www.schlange-co.com/en/index.
php?id=18. https://doi.org/10.2139/ssrn.984406
the investors are interested in finding the optimization of returns. The
Beck, J. S. (2011). Cognitive therapy: Basics and beyoind. New York: Guil-
optimization of return can be generated by minimizing the risk of their
ford Press.
investment. There are series of academic research in the field of port- Benartzi, Z., & Thaler, R. H. (2007). Naive diversification strategies in
folio management using various index models extensively for optimiz- defined contribution. American Economic Review, 91(1), 79–93.
ing the return. Each of the models developed makes an assumption Bennet, E., Selvam, D. M., Ebenezer, E., & Karpagam, V. (2011). Investors'
attitude on stock selection decision. International Journal of Manage-
about why stocks covary together so to simplify the inputs to the
ment & Business Studies, 1(2), 7–15.
portfolio selection problem. Each model leads to a unique ranking of Burrell, O. K. (1951). The possibility of experimental approach to invest-
stocks, such that if a stock enters an optimal portfolio, any higher ment analysis. Journal of Finance, 6(2), 211–219.
ranked stocks must also enter the optimal portfolios. However, differ- Carparrelli, F. D., Arcangelis, A. M., & Cassuto, A. (2004). Herding in the
Italian stock market: A case of behavioral finance. Journal of
ent models perform differently towards forecasting correlations,
Behavioral Finance, 5(4), 222–230. https://doi.org/10.1207/
fitting in historical data and the accuracy of predictions. Therefore, s15427579jpfm0504_5
the model selections are of interest because models vary in both Chira, I., & Thornton, B. (2008). Behavioral bias within the decision making
reducing and simplifying the inputs needed to perform portfolio analy- process. Journal of Business and Economics Research, 6, 8–11.
Chou, S. R., Huang, G. L., & Hsu, H. L. (2010). Investor attitudes and behav-
sis and increase the accuracy with which correlations and covariances
ior towards inherent risk and potential returns in financial products.
can be forecast. International Research Journal of Finance and Economics- Issue, 44,
16–29.
De Bondt, W. F., & Thaler, R. (1985). Does the stock market overreact?
4 | F UT U RE I M P LI C A TI O N The Journal of Finance, 40, 793–805. https://doi.org/10.1111/j.1540-
6261.1985.tb05004.x
Literature has narrated that financial decision making process was De Bondt, W. F., & Thaler, R. H. (1995). Financial decision - making in
markets and firms: A behavioral perspective. Handbooks in Operations
influenced by psychological bias of the decision makers. Behavioral
Research and Management Science, 385–410.
finance is a part of experimental economics incorporating cognitive De Bondt, W. F. (1998). A portrait of the individual investor. European
psychology with conventional finance and economic theory. The Economic Review, 42(3-5), 831–884.
ANTONY
ANTONY 7
7 of
of 7
7

Edwards, R. P., Magee, J., & Bassetti, C. W. (2007). Technical analysis of Ricciardi, V., & Simon, H. K. (2000). What is behavioral finance? The Busi-
stock trends (9th ed.). New York: Routledge. Amacom ness, Education and Technology Journal, 2, 26–34.
Evans, D. A. (2006). Subject perceptions of confidence and predictive Selden, G. C. (1912). The psychology of the stock market. New York: Ticker
validity in financial cues. Journal of Behavioral Finance, 7(1), 12–28. Publishing Company.
https://doi.org/10.1207/s15427579jpfm0701_3 Shanmugham, R., & Ramya, K. (2012). Impact of social factors on individual
Fernandes, J., Pena, J. I., & Benjamin, T. (2009). Behavior finance and esti- investors' trading behavior. Procedia Economics and Finance, 2,
mation risk in stochastic portfolio optimization. Banco Central Do Bra- 237–246. https://doi.org/10.1016/S2212-5671(12)00084-6
sil. Working Paper, No. 184. Shefrin, H., & Statsman, M. (1985). The disposition to sell winners too
Festinger, L. (1957). A theory of cognitive dissonance. Stanford, CA: early and ride losers too long: Theory and evidence. The Journal of
Stanford University Press. Finance, 40(3), 777–790. https://doi.org/10.1111/j.1540-6261.1985.
Ghoul, S., Guedhami, O., Kwok, C., & Mishra, D. R. (2011). Does corporate tb05002.x
social responsibility affect cost of capital? Journal of Banking and Shefrin, H., & Statsman, M. (2000). Behavioural portfolio theory. The Jour-
Finance, 35(9), 2388–2406. https://doi.org/10.1016/j.jbankfin.2011. nal of Financial and Quantitative Analysis, 35(2), 127–151. https://doi.
02.007 org/10.2307/2676187
Godfrey, P. c., Merrill, C. B., & Hansen, J. M. (2009). The relationship Shiller, R. J. (2000). Irrational exuberance. Princeton: Princeton University
between corporate social responsibility and shareholder value: An Press.
empirical test of the risk management hypothesis. Strategic Shleifer, A., & Summers, J. O. (1990). The noise trader approach to finance.
Management Journal, 30(4), 425–445. https://doi.org/10.1002/ Journal of Economic Perspective, 4(2), 19–33. https://doi.org/10.1257/
smj.750 jep.4.2.19
Goetzmann, W. N., & Kumar, A. (2008). Equity portfolio diversification. Statsman, M. (1999). Behavioural finance: Past battle and future engage-
Review of Finance, 12, 433–463. https://doi.org/10.1093/rof/rfn005 ments. Financial Analyst, 55, 18–27. https://doi.org/10.2469/faj.v55.
Graham, J. R., Harvey, C. R., & Huang, H. (2009). Investor competence, n6.2311
trading frequency and home bias. Management Science, 55, Sulphay, M. M. (2011). Behavioral finance. Delhi: PHI Learning Private
1094–1106. https://doi.org/10.1287/mnsc.1090.1009 Limited.
Grinblatt, M., & Keloharju, M. (2006). Sensation seeking, overconfidence and Thaler, R., Barberies, N., & Richard, H. (2003). A survey of behavioural
trading activity. NBER Working Paper No 12223. finance. Handbook of the Economics of Finance, 1, 1052–1121.
Gustave, L. B. (1895). The crowd: A study of popular mind. New York: The Thaler, R. H. (2000). Mental accounting matters. In D. Kahneman, &
Macmillian Co. A. Tversky (Eds.), Choices, values and frames (pp. 241–268). New York:
Iman, Z. (2011). Study of effectiveness models in optimal portfolio of Cambridge University Press.
shares. Middle-East Journal of Scientific Research, 10(2), 239–246. Tversky, A., & Gilovich, T. (1989). The hot hand: Statistical reality or cogni-
Kahneman, D., & Tversky, A. (1973). Availability: A heuristics for judging tive illusion? Chance, 2(1), 31–34.
frequency and probality. Cogniitve Psychology, 5, 207–232. Wall, G. (1993). The way to save: A 10-step blueprint for life time security.
Kahneman, D., & Tversky, A. (1974). Judgement under uncetainity: Heuris- New York: An Owl Book, Henry Holt and Company.
tics and biases. Science, 185, 1124–1131. Waweru, N. M., Munyoki, E., & Uliana, E. (2008). The effects of behavioral
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of deci- factors in investment decision-making: A survey of institutional inves-
sion under risk. Econometrics, 47(2), 263–291. https://doi.org/10. tors operating at the Nairobi Stock Exchange. International Journal of
2307/1914185 Business and Emerging Markets, 1(1), 24–41. https://doi.org/10.1504/
Kahneman, D., & Tversky, A. (1992). Advances in prospect theory: Cumu- IJBEM.2008.019243
lative representation of uncertainty. Journal of Risk and Uncertainty, 5,
297–323.
Khanifar, H., Jamshidi, N., & Mohammadinejad, M. (2012). Studying affect-
AUTHOR BIOGRAPHY
ing factors on analysts' decisions regarding share analysis in Tehran
Stock Exchange: A fundamental analysis approach. European Journal of
Economics, Finance and Administrative Sciences, 44, 77–87. Anu Antony
Antony:has
hascompleted
completed Ph.D
Ph.D titled “Risk Model
titled “Risk Model and Portfolio
Lo, A. W., Mamaysky, H., & Wang, J. (2000). Foundations of technical anal-
Selection: A Behavioral Approach for Optimization of Returns”
ysis: Computation algorithms, statistical inference and empirical imple-
mentation. Journal of Finance, 55(4), 1705–1765. https://doi.org/10. from Mahatma Gandhi University Kottayam in 2016. And MBA
1111/0022-1082.00265 (Finance) from Mahatma Gandhi University, Kottayam. She is
Monit, M., Pelligra, V., Martingnon, L., & Berg, N. (2014). Retail investors presently working as Assistant Professor, Rajagiri College of Social
and financial advisors: New evidence on trust and advice taking heu-
Science, Kakkanad, Kochi, India. Her teaching interests are Behav-
ristics. Journal of Business Research, 76, 1749–1757.
Mullainathan, S., & Thaler, R. H. (2000). Behavioral economics. Working ioral Finance, Financial Management, Financial Accounting, Cost
Paper, National Bureau of Economic Research: 7948 and Management Accounting, and Corporate Finance.
Olsen, R. (1998). Behavioral Finance and its implications for stock-price
volatility. Financial Analysts Journal, 54(2), 10–18.
Pasewark, W. R., & Riley, M. E. (2010). It's a matter of principle: The role
of personal values in investment decisions. Journal of Business Ethics,
93(2), 237–253. https://doi.org/10.1007/s10551-009-0218-6 How
Howto
tocite
citethis
thisarticle:
article:Antony A. Behavioral
Antony finance
A. Behavioral and and
finance
Porter, M. E. (1996). What is strategy? Harvard Buienss Review, 74(6),
portfolio
portfoliomanagement:
management:Review
Reviewofof
theory and
theory literature.
and J Public
literature. J
61–78.
Quershi, S. A., & Hunjra, I. A. (2012). Factors affecting investment decision Affairs. 2020;20:e1996.
Public Affairs. https://doi.org/10.1002/pa.1996
2019;e1996. https://doi.org/10.1002/pa.1996
making of equity fund managers. Wulfenia Journal, 19(10), 280–291.