INVESTMENTS 投资学Chap012 Behavioral Finance and Technical Analysis.pptVIP

CHAPTER 12 Behavioral Finance and Technical Analysis INVESTMENTS | BODIE, KANE, MARCUS INVESTMENTS | BODIE, KANE, MARCUS Copyright ? 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Behavioral Finance Conventional Finance Prices are correct; equal to intrinsic value. Resources are allocated efficiently. Consistent with EMH Behavioral Finance What if investors don’t behave rationally? The Behavioral Critique Two categories of irrationalities: Investors do not always process information correctly. Result: Incorrect probability distributions of future returns. Even when given a probability distribution of returns, investors may make inconsistent or suboptimal decisions. Result: They have behavioral biases. Errors in Information Processing: Misestimating True Probabilities Forecasting Errors: Too much weight is placed on recent experiences. Overconfidence: Investors overestimate their abilities and the precision of their forecasts. Conservatism: Investors are slow to update their beliefs and under react to new information. Sample Size Neglect and Representativeness: Investors are too quick to infer a pattern or trend from a small sample. Behavioral Biases Biases result in less than rational decisions, even with perfect information. Examples: Framing: How the risk is described, “risky losses” vs. “risky gains”, can affect investor decisions. Behavioral Biases Mental Accounting: Investors may segregate accounts or monies and take risks with their gains that they would not take with their principal. Regret Avoidance: Investors blame themselves more when an unconventional or risky bet turns out badly. Behavioral Biases Prospect Theory: Conventional view: Utility depends on level of wealth. Behavioral view: Utility depends on changes in current wealth. Figure 12.1 Prospect Theory Limits to Arbitrage Behavioral biases would not matter if rational arbitrageurs could fully exploit the mistakes of behavioral investors. Fundamen