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Behavior economics (English behavioral finance) and Behavioural Economics are narrow-related fields, which use the scientific research over the human and social partialnesses in thinking and feeling, in order to draw conclusions on economic decisions.
Particularly on it, how such partialnesses affects the market prices, profits and the resources distribution. These two terms are occupied mainly with the existing or missing economically the action. Economical behavioral models connect typically realizations of the psychology with the neoclassical economic theory.
Behaviour analyses concern themselves mainly with that the effects of market decisions, in addition, with the effects of the Public Choice theory. These are another source of economic decisions with similar partialnesses.
During the era of the classical political economy a close connection existed between the Wirtschftstheorie and the psychology. Adam Smith for example wrote an important text, in which he described psychological principles of the individual behavior, "to The Theory OF moral Sentiments "(the theory of moral feelings). Jeremy Bentham wrote in detail over the psychological foundations of the usefulness. Wirtschaftler began only to depart from the psychology to when they tried during the era of the neoclassical theory to establish their discipline as natural science. Now was tried to derive economic behavior from acceptance from the nature economically of the actions. The concept of the Homo was developed oeconomicus, and the psychology of this nature was based in principle on the reason. Despite all affected the psychology the analyses of many important figures with the development of the neoclassical theory, like Francis Edgeworth, Vilfredo Pareto, Irving Fisher and John May pool of broadcasting corporations Keynes.
Against center 20. Century the psychology had disappeared to a large extent from the economic discussion. It contributed a multiplicity of factors to the fact that they were again taken up and the theory of the Behavioral Economics were developed. Models over expected usefulness and usefulness after cost departure (discounted utility) arrived at large acknowledgment, by supplying examinable hypotheses with consideration of uncertainty and/or intermediate consumption (interspeed ral Consumption). A row more observed and repeating anomalies questioned themselves these hypotheses. The moreover one the cognitive psychology began into the 1960er years to regard the brain contrary to models of the Behaviorismus than data processing equipment.
Psychologists in this area such as Ward Edward, Amos Tversky and Daniel Kahneman began to test their cognitive models of the decision-making process under risk and uncertainty at economical models of behavior.
Perhaps the most important essay with the development of the discipline of the Behavioral finance and Behavioral economics was written by Kahneman and Tversky 1979. This essay with the name "Prospect theory: Decision Making Under Risk "used cognitive psychological techniques, in order to explain a number of documented anomalies when meeting reasonable economic decisions. Further important steps on the way to the development of the discipline were a good-visited and versatile conference at the university of the Quarterly journal OF Economics recognized of Chicago and an extra charge in the year 1997 to the memory of Amos Tversky, which concerned itself with the topic of the Behavioral ecomomics.
At the beginning the theories of the Behavioral finance and Behavioral were developed economics almost exclusively by experimental observations and answers to questionings. In recent time also the meaning of data from the real world increased. Also the functional Magnetresonanztomografie (fMRT) was used, in order to find out, which brain areas are used with the different steps of economic deciding. Experiments, which simulate market situations such as stock broking and auctions, were regarded as particularly useful, since they make possible to isolate the effects a certain prepossession on the behavior; the observed Marktverhalten can be explained typically in different ways. Carefully developed experiments can help to limit the number of comprehensible explanations. The experiments are in such a way arranged that they create comparable incentives, whereby obligatory transactions are using genuine money the standard.
There is three main topics in the theory of the Behavioral finance and economics (Shefrin, 2002):
Can be not generally explained to market width anomalies over individuals, who suffer from certain prejudices in thinking. Individual partialnesses often does not have the sufficiently large influence, in order to change market prices and profits. Additionally individual prejudices can neutralize themselves mutually. Cognitive partialnesses has really unusual effects then only if there is a social contamination with very emotional contents, like general greed or general panic. These lead then to widespread phenomena such as herd behavior and group thinking. Behavioral economics is based just as much on the social psychology as on the individual psychology.
There are two exceptions to this general statement. First it can be that many individuals a partial behavior in such a manner to look place - is called a behavior, which deviates from reasonable expectations - that this behavior represents the standard and thus market-far effects has. Further some behavioristische models showed expressly that a small however important group can cause market-far effects (e.g. see Fehr and Schmidt, 1999).
Key observations arranged the literature to behavioral finance to it, the absence of symmetry between the decisions to acquire or keep resources to take up. This is called colloquially "the bird Indian hand paradox "(). Also the strong loss dislike or the strong regret, which is connected with each decision, with the objects, to which a strong felt connection exists (for example the house), perfectly be lost can. Fears of loss seem to manifest itself for example in the investor behavior. If a sales from shares or other securities had to the consequence that a nominal loss must be realized, then frequently a Unwillen can be observed to accomplish this transaction (Genovese & Mayer, 2001). This can also explain, why the prices on the property market with weak demand the asking prices not to approach.
Benartzi and Thaler (1995) maintain that they solved ""(security impact mysteries), by using the folder theory. This is a mystery, which conventional financial models could not solve so far.
Some financial models, which are used during the investment of funds and the plant evaluation, use parameters of the Behavioral finance, for example
Critics of the Behavioral finance, like for example Eugene Fama, support usually the theory of the perfect market. They maintain that behavioral finance is rather a collection of anomalies as a genuine branch of the financial theory, and that these anomalies are gepreist sometime from the market or with reference to arguments of the microstructures of the market are explained. However a difference should be made between individual partialnesses and social partialnesses; first can become balanced by the market, while the other feedbacks can cause, which continue to continue to the market and from "the fair price ". A special example of this criticism is in some attempts at explanation "equity of the premium mystery ". One argues that the mystery results from the fact that market entrance barriers (both more practically and psychological kind) prevented in former times the market entrance of individuals into the securities trading. Therefore the difference of the obtained profits between securities and loans will be reduced with the time, as soon as electronic means will make the securities trading of a larger number of dealers accessible. To the fact others answer that many personal unit trust fund is administered by pension funds, so that the effect of these alleged barriers would be small. In addition professional investors and fund manager seem to hold more loans, than one would assume in view of the long-term profit differences.
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