Open AccessDesign Three Trading Strategies Based on Overconfidence, Loss Aversion, and Herd Behaviour
Author(s) -
Tzuling Liu
Publication year - 2021
Publication title -
financial forum
Language(s) - English
Resource type - Journals
ISSN - 2251-2659
DOI - 10.18282/ff.v9i4.1535
Subject(s) - overconfidence effect , loss aversion , behavioral economics , herd behavior , economics , herd , financial economics , prospect theory , microeconomics , actuarial science , psychology , social psychology , medicine , veterinary medicine , geography , forestry , herding
There is a basic assumption in the field of economics, which is people are rational. It might be taught in the first class of the principle of economics. However, this assumption could hardly be applied to the real world since people can be affected easily sometimes, especially when they cope with their assets. Thus, with combination of psychology and academic finance, behavioural finance aims to understand the effects influencing investors’ decision-making. This paper will discuss some effects which can be commonly seen in the real world, overconfidence, loss aversion, and herd behaviour included.