Behavioral finance in financial market theory, utility theory, portfolio theory and the necessary statistics: A review

The relationship between pension funds and the stock market: Does the aging population of Europe affect it?

“…In the previous section, we show evidence of varying efficiency, a dynamic behaviour that is due to a complex combination of investors' behaviours over time (Nawrocki & Viole, 2014). In this section, we analyze the specific impact of pension fund managers on market efficiency.…”

Behavioural finance perspectives on Malaysian stock market efficiency

“…In line with this assumption, the asset prices formation in financial markets is believed to be best described by the dynamic asset price theory (Westerhoff, 2003). Taken together, the investor and price formation behaviour will form an adaptive efficient market as described by AMH (Lo, 2004(Lo, , 2005(Lo, , 2012) that prescribed the dynamic behaviour of financial markets due to a complex combination of investor behaviour across time and circumstances that are adapting to information and technological changes (Nawrocki & Viole, 2014). While AMH is still in infancy stage, the theory's validity is supported by empirical research from both developed and emerging financial markets (see Hiremath & Kumari, 2014;Kim, Shamsuddin, & Lim, 2011;Lo, 2004;Todea, Ulici, & Silaghi, 2009;Urquhart & Hudson, 2013;Verheyden et al, 2015).…”

“…To be specific, the prospect theory postulates that individuals behave differently in their decision making that is risk-seeking in losses domain and risk-averse in gains domain with the middle point being the reference points. Due to the expected heterogeneity behaviour of investors at the individual security and market level, the nonparametric and nonlinear statistics are best suited for inferential analysis in behavioural finance (Nawrocki & Viole, 2014). In line with this idea, quantile regression is one of the suitable methods.…”

“…In portfolio management, Shefrin and Statman (2000) develop a behavioural portfolio theory and suggested its implications for optimal portfolio construction that are segregated into multiple mental accounts that resemble both bonds and lottery like features. In investment strategy, an adaptive investment strategy argued to be more efficient in a complex market system that is changing over time due to constant information and technological changes (Mauboussin, 2002;Nawrocki & Viole, 2014). In line with this intuition, several authors have proposed a possible adaptive investment approaches as follows.…”

Investor response to public news, sentiment and institutional trading in emerging markets: A review

“…They cover such topics as the applications of modern financial econometrics methods (Chang et al, 2013), behavioral finance (Nawrocki and Viole, 2014;Ramiah et al, 2015), bond markets (Larsson, 2013), volatility indexes (Claessens and Yurtoglu, 2013), credit spreads (Guo, 2013) and financial risk management and economic policy uncertainty (Hammoudeh and McAleer, 2015), among others. However, these papers tend to be general and, more importantly for our purposes, do not focus on emerging markets or sometimes they cover only one country.…”