Evolution of Behavioral Finance: How It Influences Corporations, Decision Making, and Financial Markets.

Ammari Odai Jehad Noor (2022) Evolution of Behavioral Finance: How It Influences Corporations, Decision Making, and Financial Markets. Faculty of Finance and Accountancy.

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My goal in this dissertation is to explore and analyze areas in the Finance and Accounting world which have been undermined up until the Covid-19 pandemic, and have shown their validity and earned the right to be further explored and researched up on and therefore further considered when corporations, individuals, and different financial participants make their decisions. I began by going over the background of behavioral finance, as well as how psychology and sociology frequently have an impact on businesses, financial markets, and the finance and accounting industries as a whole. The efficient market hypothesis theory and other hypotheses supported by conventional finance theories led the majority of people to assume for many years that the market is only based on logic and reason. Until some discrepancies were found that sparked a resurgence in behavioral finance research and rekindled the field's flame. It is crucial to comprehend what traditional finance is specifically and which aspects of it I would dispute in order to comprehend the current approach to finance in general and financial markets in particular.   Further on in the thesis I explored how different financial decision makers make their decisions, what outside forces influence those decisions, or inside forces. Behavioral finance explains how financial decisions are made from the perspective of every potential participants.  One of the pillars of financial theories is the Efficient Market Hypothesis, The Efficient Market Hypothesis suggests that since all important information has been taken into consideration, the current trading price of a stock or bond represents the security's fair value and that active traders are unable to outwit or beat the market. The thesis aims to investigate the various psychological research and elements that refute the idea that investors act robotically when making financial decisions. A big part of research done on behavioral finance points to the direction of behavioral biases being heavily prevalent in financial decision makers, so prevalent they they have the ability to affect financial markets in ways that disprove the EMH. The Behavioral Biases I discussed were: 1) Loss aversion. 2) Anchoring 3) The sunk-cost bias 4) Confirmation bias 5) Short-termism 6) Overconfidence 7) Framing 8) Herding 9) Representativeness 10) Familiarity   The final chapter of the thesis discusses the Covid-19 pandemic since it was one of the major reasons I was personally introduced to Behavioral Finance, and because the research on it is up to date as it is a recent event that the consequences of are still unfolding. The Covid-19 pandemic affected the markets in ways that can only be explained by opposing the Efficient Market Hypothesis, therefore proving the prevalence of the field of Behavioral Finance.


Budapest Business University


Faculty of Finance and Accountancy


Pénzügy Tanszék




Pénzügy és Számvitel


Konzulens neve
Konzulens típusa
Assignment, Scientific qualification, Institution
Dr.habil. Ábel István
egyetemi tanár; Pénzügy Tanszék; PSZK
Dr. Nagy Gyula
főiskolai tanár; Pénzügy Tanszék; PSZK

Item Type: Thesis (UNSPECIFIED)
Uncontrolled Keywords: finance, financial markets, koronavírus-járvány (COVID-19), organizational behavior, sociology
SWORD Depositor: Archive User
Depositing User: Archive User
Date Deposited: 2023. Apr. 20. 15:42
Last Modified: 2023. Apr. 20. 15:42

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