A STUDY OF THE INVESTMENT BEHAVIOR BASED ON BEHAVIORAL FINANCE

Abstract

Behavior finance introduces psychology, sociology and other research methods into the study of investment behavior to explain how investors handle the information and take actions. This paper presents the literatures as theoretical solutions to the market anomalies of the traditional market theories. The behavioral psychology is examined through the study on the questionnaire of Chinese security investors. The results show that the investors are not always adopt rational behaviors as traditional finance theory assumed, but make a lot of irrational decisions based on individual cognitive and prejudices, even institutional investors often show the characteristic of irrational. In the guidance of the behavioral finance theory, the research will be closer to the reality and give more significant insight to the selection of investment strategy and psychology characteristic used to explain market anomalies.