Rational Investment Decisions of Irrational Household Investors

Dr. Sarika Srivastava

Volume : I, Issue : VII, December - 2012

Rational Investment Decisions of Irrational Household Investors

Dr. Sarika Srivastava

Abstract :

Traditional finance appears to play a limited role in understanding issues such as how do individual investors perform, how do they choose their portfolios, and why do returns vary across stocks for reasons other than risk. Finance education in general can be more useful if it sheds specific light on active investing by addressing aspects such as what mistakes to avoid while investing, and what strategies in financial markets are likely to work in terms of earning supernormal returns. These are the main pedagogical goals of behavioural finance, which allows for explanations of financial phenomena based on non–rational behavior amongst investors. This paper explores some of the unanswered important questions about stock markets that can be examined and investigated by an emerging field, behavioral finance. This study has focused on understanding the behaviour of households as investors in various financial instruments which are traded in SEBI regulated markets.