Papers by Dr.K.Riyaz ahmed
Asian Journal of Research in Social Sciences and Humanities
Modern finance theories are built on the foundation of Neo classical economics, which says that h... more Modern finance theories are built on the foundation of Neo classical economics, which says that humans are always rational, in decision making. Expected Utility Theory (EUT) of neoclassical economics states that, humans take decisions primarily based on the ‘utility’ to be derived from a decision. After all theory is a way to explain an epmrical observation. Prospect theory an alternative to expected utility theory proves that humans are not always rational in taking decisions. Loss aversion, Regret aversion, Mental accounting, are the factors considered in prospect theory for influencing the decision maker's behavior. Behavioral finance which deals with psychological aspects of investors in taking financial decisions, details about the various biases and heuristics which cause behavioral differences or irrationality in taking financial decisions. In this study, we have collected data from 100 respondents (investors) to know the impact and influence of various prospect and marke...
Financial behavior and financial well-being are two closely related aspects of an individual’s fi... more Financial behavior and financial well-being are two closely related aspects of an individual’s financial decision making. This study attempts to investigate the extent to which financial behavior influences financial well-being in the Indian scenario. The data is collected using a structured questionnaire from a sample of 150 respondents. The study employs Financial Management Behaviour Scale (FMBS) (Dew & Xiao, 2012) to measure financial behavior. Factor analysis and multiple regression are performed to find the influence of financial behavior on financial well-being. The findings of the study suggest that except for credit commitment all the other behavioral factors like future security, savings and investments, credit indiscipline, and financial consciousness have a significant impact on the financial well-being of an individual in the Indian scenario. The regression coefficients of financial well-being are strongly determined by financial consciousness. The study is a contributi...
Modern finance theories are built on the foundation of Neo classical economics, which says that h... more Modern finance theories are built on the foundation of Neo classical economics, which says that humans are always rational, in decision making. Expected Utility Theory (EUT) of neoclassical economics states that, humans take decisions primarily based on the " utility " to be derived from a decision. After all theory is a way to explain an epmrical observation. Prospect theory an alternative to expected utility theory proves that humans are not always rational in taking decisions. Loss aversion, Regret aversion, Mental accounting, are the factors considered in prospect theory for influencing the decision maker " s behavior. Behavioral finance which deals with psychological aspects of investors in taking financial decisions, details about the various biases and heuristics which cause behavioral differences or irrationality in taking financial decisions. In this study, we have collected data from 100 respondents (investors) to know the impact and influence of various prospect and market variables on investor satisfaction. Tools like ANOVA and Regression have been used to analyze the collected data. Result shows that not all the prospect factors and Market forces have influence on the satisfaction of the investors.
Rationality is the only factor that differentiates us as " Homo Economicus " from Homo sapiens. I... more Rationality is the only factor that differentiates us as " Homo Economicus " from Homo sapiens. It is on which theories and concepts of economics and finance are built upon. Neo classical economics stresses that people are rational in making decisions. That is why rational preferences are assumed to be complete and transitive. Most important foundation work on this aspect " expected utility theory " was developed by John Van Neuman and Oskar Mor Genstern in 1944 gives a conceptual framework of how people should act in making decisions. But empirical evidences have proved that people are not always rational in considering all the available information of an opportunity before deciding on it. After all, theory is a way to explain an observation. The most important breakthrough came in the year 1979 from Daniel Kahneman and Amos Tversky, who came out with a theory opposite to expected utility theory, called " Prospect Theory ". Prospect theory " s " value function " is analogues to utility function of expected utility theory. Another key building block of prospect theory is the use of decision weights rather than probabilities. Practically, it is not possible to have a decision maker with unlimited cerebral RAM, who would consider all relevant information and come up with a choice under all circumstances. Ease of processing and information overloaded leads to Heuristics or Shortcuts. There are two types of heuristics. Type 1 is autonomic, non cognitive, economize on effort and Type 2 is purely cognitive in nature. In a series of articles Daniel Kahneman and Amos Tversky identified three key heuristics named Representativeness, Availability, Anchoring. This paper studies the impact of demographic variables in determining these heuristics and also the level of impact of heuristics on investment performance. In addition to the three heuristic variables mentioned overconfidence and Gambler " s fallacy are also included in the study. Data are collected through questionnaires. The collected data then analyzed using statistical tools like ANOVA and Regression to know the relationship and impact of the Heuristics
Modern finance theories are built on the fundamentals of 'neo classical' economics. It says that,... more Modern finance theories are built on the fundamentals of 'neo classical' economics. It says that, investors always make 'rational' decisions. But, market crashes, bubbles, and other shocks in the economy shows that, investors are not always rational and evident proves are even brought into notice that they are highly irrational in taking decision. Although behavior of investors has been studied for hundreds of years, behavioral finance which considers the reactions of buyers in stock markets is quite a new area. Behavioral theories which are based on consumer psychology attempt to understand how emotions affect the individual decisions of investors. The main objective of this study is to extract the factors affecting Indian investor's decision while buying or investing in Indian stock markets. In addition, the relationship between the factors and the investment performance is also studied. The study begins with detailing existing behavioral theories, based on which hypotheses are proposed. Questionnaires distributed to various individual investors in Salem district and data are collected. Collected data were then analyzed using statistical software like SPSS. Behavioral variables are studied factor analysis and the influence of factors on behavioral decisions is tested using Regression analysis. Outcome of this analysis will give a clear picture of most influential behavioral factors and its level of influence in investor decisions. Semi structured interviews with the investment bankers and brokers are then conducted to have a better understanding of investor's behavior. Factor analysis results show that theoretical grouping of behavioral factors into Herding, Prospect, Market, Overconfidence, and Anchoring are not supported in the analysis results. But based on the existing theoretical model, regression analysis is proceeded to know the impact of theoretical factors. From the analysis, in total, most of the behavioral variables of four factors: Prospect, Herding, market variables have high impact on investor decisions. Participation of investors in the stock markets is gradually growing in the recent years and investors are well informed about the process of investing, these days it becomes a necessity for investment houses, fund managers, trading firms, and individual investors to have a greater understanding of behavioral factors and its effects on the stock prices to keep investment performance 'optimum' at any mood of the stock market.
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Papers by Dr.K.Riyaz ahmed