A Study on Behavioural Finance in Financial Markets

Abstract

There are mainly two facets of financial market study viz. Traditional Finance and the recent development known as Behavioural Finance. Traditional finance foundation is mainly based on efficient market concept, Investor rationality concept and the modern portfolio theory developed by Markowitz. The traditional finance theories were not so been challenged until 1990. Researchers started pointing out shortcomings of the existing theory and challenged the investor rationality concept in particular. A new paradigm, as a result, known as behavioural finance emerged. In this paper an attempt has been made to present the shortcomings of the traditional finance theories as pointed out by researchers and also assesses the role and significance of behavioural finance in financial markets.