How Does Behavioral Finance Affects Financial Decision Making

  Assignment Help  25th Aug 2021

Behavioral Finance is the amalgamation of two words Behaviour + Finance. It studies the psychological influences on the market outcomes. It proposes how the concept of psychology can affect financial Behaviour of investors and financial practitioners. This is a complex subject and which is why students would like to get rid of it. But the students can rely on experts of the BookMyEssay for Behavioral Finance assignment help and rest assured to get best work quality.

Behavioral Finance is used to study the anomalies or different outcomes across various sectors and industries. Its key aspect is the effect of psychological bias on investments. These influences and biases explain the various market anomalies. This subject brings finance and psychology on one platform. It explains the irrational financial decisions taken by people and institutions. Students who are studying this subject are expected to excel in multiple areas. In case you find it cumbersome, you can take assignment writing help from professional writers BookMyEssay.

Related Post: The Link Between Behavioural Finance and the Capitalizing Choices

Concepts of Behavioral Finance

It has five main concepts:

Mental Accounting: It describes the process by which people code, categories and evaluate economic outcomes. This concept was introduced by Richard Thales in his paper "Mental Accounting Matters". He noticed that people place the value of money differently, thus exposing them to irrational decision making.

Herd Behaviour: According to this concept, people mimic the financial decisions taken by majority. In short, it is the decision based in part on the basis of choices of others. Herding Behaviour is increased by factors like fear, uncertainty or shared identity of decision makers.

Emotional Gap: This term refers to decision making based on extreme emotions like fear, anxiety, anger, excitement etc. Often these emotions are the reasons why people do not make rational decisions. Learning these concepts to answer assignment questions can be tricky at times. Thus, students can approach BookMyEssay for Behavioral Finance assignment help and rest assured for plagiarism free content.

Anchoring: Anchoring bias exists when rely too much on the pre-existing information or the first information they find while making decisions. It can be perceived as a mental flaw that impacts the way the person derives the price of anything. It is based on the fact that the initial information about the price of the product creates an anchor in our minds.

Self-Attribution: This term refers to the tendency of making choices based on overconfidence in one's own knowledge and skill. In this concept people tend to keep their knowledge well above others even it is evident that it falling short.

The Final Word

Behavioral Finance helps in studying how people can deviate from rational decisions. It provides a blueprint to make us better decision maker. The double concept of Behavioral Finance is often hard to deal for students. Thus students can approach BookMyEssay for assignment writing help.

BookMyEssay, a world famous academic service provider, work day and night to deliver high-quality academic writing service at pocket-friendly costs. Students can avail their assignment without any difficulties as their helpdesk is open 24*7. Feel free to visit their website or you can mail them too.


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