There is no specific way about the stock market behaviour . Its a random process, similar to the brownian motion .What investors try to do is predict the future performance of the stocks based on historical data .This does not always give positive results .
Investors are expected to make their decisions through the use of fundamental analysis and/or technical analysis. As behavioral finance believes, investors tend to deviate from rationality whenever they make their decisions. In other words, they tend to exhibit some behavioral biases whenever making their decisions due to various reasons. Some widely researched investor biases include herd behavior, disposition effect and overconfidence. Hope, to have a general understanding, the following article would be helpful for you.
https://www.researchgate.net/publication/301578726_Stock_Market_and_Macroeconomic_Behavior_Evidence_from_Karachi_Stock_Exchange_KSE
Article Stock Market and Macroeconomic Behavior: Evidence from Karac...
https://www.researchgate.net/publication/303830251_Macroeconomic_Determinants_of_the_Behavior_of_Dhaka_Stock_Exchange_DSE
Article Macroeconomic Determinants of the Behavior of Dhaka Stock Ex...
By analogy, the question may be asked how behavioral economics can be used to study investor behavior in capital markets, including securities markets? How is it that in these markets every several or a dozen or so years, there is a high re-evaluation of the valuation of financial instruments, assets, including company shares? What is the issue of the effect of the sheep's rush, which to some extent is often inspired by the appropriately constructed, liberalized offer of products and services of financial institutions? Besides, how does it fit into the issue of the cyclical cyclical nature of economic processes, ie the volatility of economic growth of entire national economies in the long-term perspective? In addition, the issue of the various state intervention instruments applied by national governments is also important, some of which also act on consumer behavior of small investors and shareholders.
I invite you to the discussion
The above question inspired me to the following considerations:
In the long-term period, this correlation is significant. On the other hand, however, the importance of state intervention implemented through monetary policy pursued by the central banking and through the budgetary policy pursued by the ministerial bodies appointed for this purpose within the state administration is growing. The central banks in many countries, including the Federal Reserve Bank and the European Central Bank after the outbreak of the global financial crisis in the autumn of 2008, have applied particularly significant interventionist monetary policy. I researched this issue and published scientific publications on this topic.
In view of the above, I would like to ask you: Is the situation on the stock exchange markets really correlated with the macroeconomics of the entire economy?
Please, answer, comments. I invite you to the discussion
In addition, I note the interesting discussion inspired me to the following considerations:
In the background of the plot of the film "Transcendence" from 2014, directed by Wally Pfister, the topic of analysis is analyzed by a computerized system combining artificial intelligence with human consciousness loaded into a computerized system of artificial intelligence connected to Internet resources and using the resources on its own.
This independence also means access to various databases, including internal Big Data database databases belonging to certain corporations, including listed companies that are issuers of securities.
The artificial intelligence connected to the Internet, according to a specific strategy, also independently conducts transactions on the market of valuable securities.
In addition, it establishes statrtsets offering innovative technologies, which in a short time become large capital companies characterized by a high capitalization of exchange quotations of shares of these companies listed on stock exchanges.
The above-presented film "Transcendence" presented above picture of integration of artificial intelligence, human consciousness and Internet resources is a picture of typical science fiction.
However, on the other hand, the function of this image is also to inspire to discuss the potential possibilities of integration of the above-mentioned elements into one system of autonomous and working in the Internet resources artificial intelligence, in addition also containing some human feelings.
The above image from the movie "Transcendence" became an inspiration to formulate the following question below.
The mentioned motif from the movie "Transcendence" looks impressive and convincing in this film mainly because it has a full spectrum of innovation.
The use of new, innovative instruments for forecasting specific economic categories usually works until these innovative instruments continue to be innovative, ie until they are disseminated to the majority of participants in specific markets.
In view of the above, I am asking you to answer the following question: Will artificial intelligence combined with the analysis of data collected in the Big Data database systems be used in automated forecasting of valuations of securities and other assets on capital markets?
Please, answer, comments. I invite you to the discussion.
Unethical business practices and insider trading transactions on Stock Exchange
Unethical business practices operate in different countries to varying degrees and participate in economic processes.
For many entities, market participants, business partners and consumers, they generate additional costs.
They can also be a source of gray economy growth, including avoiding paying taxes.
Thus, there are social costs for individual entities and financial for the entire economy.
on the capital markets, one of unethical business practices is, for example, insider trading, ie the use of confidential information by decision-makers with access to confidential information used to conduct transactions to purchase or sell financial instruments, including securities or other securities or other capital markets.
In individual countries, there are various instruments to combat the use of unethical business practices, the shadow economy, etc.
The effectiveness of individual normative solutions, the scale of restrictions applied, and the business mentality of market participants, entrepreneurs and businessmen are different.
Another mentality is related to the level of awareness regarding corporate social responsibility.
In individual countries, social campaigns are carried out suggesting the legitimacy of developing concepts based on corporate social responsibility.
In view of the above, please answer the following question: Is unethical business practices a negative external effect of non-ideal market structures or imperfection of the social market economy?
Please, answer, comments. I invite you to the discussion.
Can current globalization processes increase the systemic risk of global economic and financial crises and the future of a spectacular stock market crash in the future?
Yes. In my opinion, globalization is leading to the Integration of Business Cycles. In this way, globalization may deepen economic crises, including the global financial and debt crisis. An example was the global financial crisis, which appeared in mid-September 2008. At that time bankruptcy was announced by one of the largest investment banks in the world. As a result of unreliable credit risk management procedures, billions of USD of financial losses have been generated. It turned out that the unwritten rule no longer works, that "big can not fall". However, it is the emergence of ever larger international corporations and financial institutions that is one of the main determinants of the processes of economic globalization that have been progressing in recent years. these processes continue. Every few years, as a result of the merger of some of the largest financial institutions through mergers and acquisitions, more and more banks are formed. On the other hand, international operating industrial corporations move their factories from country to country, looking for cheaper workforce, and international trading and service corporations set up subsidiaries and sales outlets in other countries. Capital links grow transnational and thus systemic risk grows, whose sources can be related to the progressing economic globalization.
Please reply. I invite you to the discussion
Is the importance of the psychology of financial markets and behavioral economics in the securities markets falling after the global financial crisis?
Are the investors operating in securities markets more cautious in making investment decisions after the global financial crisis, or are they more thoroughly analyzing the investment risk of investing in capital markets?
Has any of you conducted research aimed at identifying possible changes in the significance of the psychology of financial markets and behavioral economics in the capital markets, including securities markets after the global financial crisis of 2008?
If research shows that the importance of the psychology of financial markets and behavioral economics on the capital markets is decreasing, what is it mainly determined?
Is this the result of post-crisis higher awareness of investment risk among investors, or also changes in the structure of dominant segments of investors operating on capital markets, or is it also the result of the increase in the number of transactions conducted by computerized transaction systems?
Please reply. I invite you to the discussion
My reflections on behavioral economics:
Behavioral economics
In the second half of the twentieth century, new neoclassical trends dominated in the history of economic thought, partly referring to the foundations of classical economics.
However, at the end of the twentieth century and in recent years, various concepts that complement or partly undermine certain assumptions of neoclassical economics are developing dynamically.
These are primarily theories based on conducted studies on behavioral consumer behavior in consumer goods markets, investors and shareholders in the capital markets, entrepreneurs in the markets of capital goods, etc.
These various theories supported by the results of research are in the mainstream of behavioral economics.
However, despite the ongoing development of behavioral economics, neoclassical economics still dominates in academic textbooks dedicated to students of economics.
Neoclassical economics is based on the fundamental assumption that people make rational economic decisions.
Advocates of the neoclassical economics suggest that the theory of neoclassical economics correlates with the key assumptions of psychology regarding rational human behavior.
I agree with this correlation that irrational decisions only apply to situations in which people feel very strong emotions of both negative nature, such as anger, hostility, hatred or positive emotions associated with feeling of love, friendship or belonging to a given social group.
On the other hand, economic decisions are always made rationally according to classical and neoclassical economics.
However, in recent years, on the basis of the development of behavioral economics, there are more and more data and results of research carried out, that unfortunately there are many examples suggesting the irrationality of some economic decisions.
Often, consumers make unnecessary purchases based on an efficiently carried out advertising campaign for products or services.
Perhaps consumers are more and more often susceptible to the impact of effective advertising campaigns, in addition to traditional media, also in new online media, including on social media portals, where viral marketing is widely used.
Often in advertising campaigns, specific products and services are presented as unique, innovative or having such features as opposed to the substitutional offer of competition.
The message that is not always formulated in the advertising campaign is truthful, but some consumers may receive such a message as objective and this translates into an increase in the sale of a specific, effectively advertised assortment.
In addition, there are price promotional campaigns in large-format stores, which also stimulate consumer interest, increase sales.
Pricing promotional campaigns often also increase the purchase of unnecessary goods for consumers or proverbial buying.
A negative aspect of such buying is the subsequent discomfort of spending too much money on this type of shopping, despite the fact that the main activation factor was an effective price promotional campaign.
Often it happens that in the situation of this type of occasional purchases for stock some of the purchased products are thrown away, that is, they end up in the trash.
Especially often such situations happen, if consumers under the influence of emotional susceptibility to marketing content used in an advertising campaign make purchases of food products with a short shelf-life date.
These are typical situations indicating the unnecessary purchases of unnecessary products by consumers.
In such situations, the effectiveness of advertising campaigns can be analyzed in terms of the psychological impact on consumer emotions, so this is the subject matter of the issue described as behavioral economics.
According to classical and neoclassical economics, consumers rarely change their preferences, and if they change it is a very slow process, difficult to diagnose in a short time.
In addition, according to the trend of neoclassical economics, citizens, households and business entities maximize their own profits in the conditions of competitive market structures.
However, the results of experiments and conducted research in the field of behavioral economics have already questioned the fundamental assumptions on which the theory of choice in the neo-classical economy is based.
Why is it so that people do not always make rational economic decisions?
The answer to this is given by behavioral economics, which deals with cognitive errors affecting people's decisions.
These decisions are not always rational and because they concern many shopping situations not always needed products, so they are also of significance for the domestic or even global economy.
The global significance of these not always rational economic decisions arises when the effects of these decisions are analyzed in the context of economic globalization processes.
In addition, the results of research in the field of behavioral economics indicate that consumer preferences may change depending on the context, ie the specificity of a particular situation in which decisions are made.
In addition to the study of consumer behavior on the basis of behavioral economics, there are behaviors of, for example, investors on capital markets who also often do not have full information about the issuer of securities buy or sell shares, bonds and other instruments listed on securities markets under the influence of partly emotions and not just rationally made decisions.
Emotion, which often accompanies decision making about purchasing or selling securities, may have positive acceptance of high risk levels in good times in different markets and as a result of the so-called "sheep's rush", which boils down to buying, because it was previously bought by a friend and neighbor, and earned it.
There may also be irrational decisions on the sale of securities in a situation where it later turns out to be a short-term panic on the capital market.
In the light of the above examples, irrational economic decisions made by citizens and economic entities often conditioned by the psychological factor of positive or negative emotions are more and more numerous.
This raises the question why more and more in recent years we will be able to provide these examples confirming the validity of the development of research in the field of behavioral economics.
Is it because in recent years more and more economists are growing up and seeing research in the field of behavioral economics?
Or rather because in the deregulated financial markets market instability situations are more frequent, markets tend to lose their market equilibrium, financial crises occur more frequently, and the scale of undervaluation and the more revalue of market valuations of certain assets can be more and more pronounced on stock exchanges.
Analogously, the impact of more and more effective advertising campaigns on consumers, advertising campaigns also conducted on social media websites can increase the importance of occasional emotions in the context of decisions to buy specific products or services.
I invite you to the discussion
- Badges
- Science topic
- Similar topics
- Phytochemistry
- Extracts