Expressions of Irrational Investment Behaviour and Proposals to Reduce the Irrational Behaviour

Yige Li

doi:10.54254/2754-1169/54/20230872

Research Article

Open access

Published on 1 December 2023

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Li,Y. (2023). Expressions of Irrational Investment Behaviour and Proposals to Reduce the Irrational Behaviour. Advances in Economics, Management and Political Sciences,54,27-32.

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Expressions of Irrational Investment Behaviour and Proposals to Reduce the Irrational Behaviour

Yige Li *^,1,

¹ Ludwig Maximilian University of Munich

* Author to whom correspondence should be addressed.

https://doi.org/10.54254/2754-1169/54/20230872

Abstract

Behaviour finance gained more and more weight in the development of finance theory in comparison to standard finance theory which is dominated by the efficient market hypothesis. As a field of behavioural economics, it combines psychology and finance to understand how human behaviour and cognitive biases impact financial decision-making. Some market anomalies which seem strange or impossible according to standard finance theory can be understood and explained with the help of behavioural finance theory. Through analysis and literature review, this paper explores the common expressions of irrational behaviour such as representativeness, herd effect, anchoring, overconfidence, and their effect on the investment financial market. This paper finds that people can be easily influenced by any given information. Individuals’ personalities and social backgrounds also play a decisive role in making investment decisions. Therefore, some possibilities and advice to reduce the losses caused by human cognitive biases are also provided in the paper.

Keywords

behaviour finance, representativeness, herding, disposition effect, loss aversion

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References

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Cite this article

Li,Y. (2023). Expressions of Irrational Investment Behaviour and Proposals to Reduce the Irrational Behaviour. Advances in Economics, Management and Political Sciences,54,27-32.

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About volume

Volume title: Proceedings of the 2nd International Conference on Financial Technology and Business Analysis

Conference website: https://www.icftba.org/

ISBN：978-1-83558-155-1(Print) / 978-1-83558-156-8(Online)

Conference date: 8 November 2023

Editor：Javier Cifuentes-Faura

Series: Advances in Economics, Management and Political Sciences

Volume number: Vol.54

ISSN：2754-1169(Print) / 2754-1177(Online)

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