Prospect Theory, Market Forces & Investor Satisfaction

Asian Journal of Research in Social Sciences and Humanities, Vol. 6, No. 7, July 2016, pp. 1252-1259

8 Pages Posted: 26 Jul 2018 Last revised: 7 Dec 2018

See all articles by Dr. K. Riyazahmed

Dr. K. Riyazahmed

SDM Institute for Management Developement

M. G. Saravanaraj

Muthayammal Engineering College - Department of Management Studies

Date Written: July 5, 2018

Abstract

Modern finance theories are built on the foundation of Neoclassical economics, which says that humans are always rational, in decision making. Expected Utility Theory (EUT) of neoclassical economics states that humans make decisions primarily based on the "utility" to be derived from a decision. After all, the theory is a way to explain an empirical 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. The result shows that not all the prospect factors and Market forces have an influence on the satisfaction of the investors.

Keywords: Behavioral Finance, Loss Aversion, Bias, Mental Accounting, Segregation

Suggested Citation

Ahmed, Riyaz and Saravanaraj, M. G., Prospect Theory, Market Forces & Investor Satisfaction (July 5, 2018). Asian Journal of Research in Social Sciences and Humanities, Vol. 6, No. 7, July 2016, pp. 1252-1259, Available at SSRN: https://ssrn.com/abstract=3208658

Riyaz Ahmed (Contact Author)

SDM Institute for Management Developement ( email )

No. 1 Chamundi Hill Road
Sidharthnagar
Mysore, Karnataka 570011
India
9790548895 (Phone)

HOME PAGE: http://https://www.sdmimd.ac.in/riyazahmed

M. G. Saravanaraj

Muthayammal Engineering College - Department of Management Studies ( email )

Rasipuram, Tamilnadu 637408
India

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