A pragmatic view on the financial theories

Open access

Abstract

This presentation reviews some real examples from a trading daily basis behavior proving the sentiment is one of the most important drivers when it comes to investment decision. During decades of studying and observing the financial markets we have seen different approaches in the light of many prestigious writers. Are we rational enough to be good candidates for Fama’s theory of Efficient Market Hypothesis? Is it true what John Maynard Keynes stated 90 years ago when he said „the market is subject to waves of optimistic and pessimistic sentiment”? Is the financial behavior the new trend in the financial markets? Are Daniel Kahneman (Nobel Prize winner 2002) and Amos Tversky the new challengers in the market theories league? Future research should concentrate on various symptoms of sentiment and what makes investors become prone to sentiment. This is an important issue to be debated since investors constantly have to analyze, process and interpret huge data of information which provides the basis for their actions.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Abarbanell J. S. Bushee B. J. (1997) Fundamental Analysis Future Earnings and Stock Prices Journal of Accounting Research 35 (1) 1-24.

  • Baker H. K. Nofsinger J. R. editors (2010) Behavioral Finance Investors Corporations and Markets The Robert W. Kolb Series in Finance John Wiley & Sons Inc. Hoboken New Jersey.

  • Bodie Z. Kane A. Marcus A. J. (2014) Investments 10th Edition McGraw-Hill Education.

  • Diermeier J. J. Ibbotson R. G. Siege L. B. (1984) The demand for capital market returns: A new equilibrium theory Financial Analysts Journal 40 (2) 74-80.

  • Fama E. F. (1965) The Behavior of Stock Market Prices The Journal of Business 38 (1) 34-105.

  • Glickstein D. A. Wubbels R. E. (1983) Dow Theory is alive and well! The Journal of Portfolio Management 9 (3) 28-32.

  • Helfert E. A. (2001) Financial analysis tools and techniques: a guide for managers 10th Edition New York McGraw- Hill.

  • Kahneman D. Tversky A. (2000) Choices Values and Frames Cambridge University Press.

  • Keynes J. M. (2008) The General Theory of Employment Interest and Money Atlantic Publishers&Distributors (P) LTD.

  • Mandelbrot B. Hudson R. L. (2004) The (mis)behavior of markets Basic Books New- York.

  • Markowitz H. M. (1991) Foundations of Portfolio Theory The Journal of Finance 46 (2) 469-477.

  • Murphy J. (1999) Technical Analysis of the Financial Markets New York: New York Institute of Finance.

  • Reilly F. K. Brown K.C. (2012) Investment Analysis and Portfolio Management 10th Edition South-Western Cengage Learning

  • Schumpeter J. A. (2006) History of Economic Analysis Routledge's collection Taylor & Francis e-Library.

  • Sharpe W. F. (1964) Capital Asset Prices: A Theory 0f Market Equilibrium under Conditions of Risk The Journal of Finance 19 (3) 425-442.

  • Smith A. (1998) The Wealth of Nations The Electric Book Co

  • Zaloom C. (2007) The Discipline of Speculators in Global Assemblages: Technology Politics and Ethics as Anthropological Problems (eds A. Ong and S. J. Collier) Blackwell Publishing Ltd Oxford UK.

Search
Journal information
Metrics
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 271 185 14
PDF Downloads 190 129 15