this article is related are the Disciples profiting from the Doctrine?

This article is related are the Disciples profiting from the Doctrine? This arical presents colbywright, prithviraj banerjee,And vaneesha boney. Behavioral finance has received a great deal of attention in academia over the past 15 years or so leafier. Objective is to measure how much acceptance and success behavioral finance is garnering in the practitioner sphere. To do so, we begin by identifying 16 self-proclaimed or media-identified “behavioral mutual funds” that implement a layer of behavioral finance in their investment strategies. The self-proclaimed or media-identified association of these 16 mutual funds with behavioral finance motivates at least three practical questions. First, irrespective of their performance, are they successfully attracting investment dollars—are any investors buying into the notion of investing based on behavioral finance? Second, the key question, are they actually earning abnormal returns? Third, if they are earning abnormal returns, how do their investment strategies differ from matched, non-behavioral firms?

This article finding is the flow of funds into these behavioral funds is higher than the flow of funds into index and matched actively managed, non-behavioral funds, suggesting that behavioral mutual funds are effectively attracting capital.  They generally beat S&P 500 Index funds on a raw, net-return basis, which is not an easy task as shown in numerous previous studies. Behavioral finance has gained substantial attention in academia and seems to be gaining greater acceptance among practitioners.

Does Overconfidence Affect Corporate Investment? CEO Overconfidence Measures Revisited

Summary:

This article presents the growing research area of Behavioral Corporate Finance in the context of one specific example: distortions in corporate investment due to CEO overconfidence. We first review the relevant psychology and experimental evidence on overconfidence. We then summaries the results of Malmendier and Tate (2005a) on the impact of overconfidence on corporate investment. We present supplementary evidence on the relationship between CEOs’ press portrayals and overconfident investment decisions.

This alternative approach to measuring overconfidence, developed in Malmendier and Tate (2005b), relies on the perception of outsiders rather than the CEO’s own actions. The robustness of the results across such diverse proxies jointly corroborates previous findings and suggests new avenues to measuring executive overconfidence.

Keywords are behavioral corporate finance, CEO overconfidence & corporate investment.

The literature in behavioral economics and behavioral finance departs from the traditional economic model to incorporate psychological evidence on non-standard preferences and beliefs, such as loss aversion, sunk-cost fallacy, or overconfidence. As economists we are interested in market interactions. In the market, high-stake incentives and repeated transactions might discipline overconfidence is to construct a plausible measure of overconfidence. Biased beliefs naturally defy direct and precise measurement. In our previous work, we propose two approaches. The first is a ‘revealed beliefs’ argument. We infer CEOs’ beliefs about the future performance of their company from their personal portfolio transactions. The second approach captures how outsiders perceive the CEO.deviations. The analysis of overconfidence relates several branches of the psychology literature. First, an extensive experimental literature documents the tendency of individuals to consider themselves ‘above average’ on positive characteristics. The better than average effect also affects the attribution of causality. Because individuals expect their behavior to produce success, they attribute outcomes to their actions when they succeed and to bad luck when they fail. This self-serving attribution of outcomes reinforces overconfidence. The biggest challenge for the analysis of overconfidence. While overconfidence about the firm’s projects may be less likely in external board members. Another important issue is the selection of board members.
http://eml.berkeley.edu/~ulrike/Papers/07_eufm_006.pdf

Psychology of investors  

Behavioral finance defined and highlights inefficiencies such as under or over-reactions of investor to information as causes of market trends and in extreme cases of bubbles and crashes. Such reactions have been attributed to emotions of investor about  Greed, pride, hope, fear.

Emotions of investing behavior

1.    Greed

2.    Pride

3.    Hope

4.    Fear

Active Investors

Introduction:-

•       “An investor is a person who allocates capital with the expectation of a financial return.”

•       Investors always wish for huge benefits when they invest in the market.

•       To invest in stock market, than you can have different options for investment for which probably you are not aware.

•       This investment could be a lot closer and simpler than you think.

•       If you make any wrong mistake in selecting the stocks, then you may have to lose all your cash.

•       So all investor should be active and aware about stock market.

•       Here are five steps to becoming an active investor.

(1) Know your rights

(2) Exercise your rights

(3) Stay Informed

(4) Analyze Proposals

(5)Legal recourse

1)      Know Your Rights

•       Know your right as a shareholder. you must play a more active role.

Ø  How you can safeguard your interests as a owner of the company.

Ø  How you can take up the cudgels (fight) against corporate misgovernance, influence the decisions taken by companies and be an informed investor.

2)      Exercise your rights

•       Company shareholder little influence on company’s decisions.

•       Investor can vote on key business proposals.

        The law required companies to obtain shareholder approval on a variety of issues like

q   Approving mergers or acquisitions

q  Appointment of directors on the company board

q  Changing auditor…etc

•        If you are physically attend the Annual General Meeting (AGM), you can even bring up issues and ask uncomfortable questions from the management.

3)        Stay Informed

•       Companies are required to send copies of the annual report and give timely notice for shareholder meetings with detail of the agenda.

•       If you keep abreast of what’s going on, you can take decisions regarding your investment.

•       If enough information has not been provided in the shareholder notice, and report, etc.

•        investor should write to the company for clarifications or raise these issues in the general meeting.

4)       Analyze Proposals

•       Whenever a big merger, acquisition, and restructuring deal is proposed by company.

•       it raise questions.

q   How will it benefit the company.?

q  What is the rationale for the decision.?

q  Will it create value for shareholders.?

•       It is not easy to the inner workings of a merger or acquisition. Create many problems e.g.

q   Terms of sharing of resources

q   Utilization of manpower.

q   Access to raw material etc… 

•       Investor should watch out for red flags in such deals, such as a huge dept to finance an acquisition, or overpaying for the purchase.

5)      Legal recourse

§  It’s not easy a shareholder to initiate direct action against a company.

§  Section 235 of the companies act allows investigation into a firms affairs.

§  Shareholder can also apply to the Company Law Board (CLB) under sections 397 and 398 of the Act to appeal against oppression of their interest or mismanagement by the firm.

§  Shareholder can also file a complaint against listed companies with SEBI for online.

Learning:-

Ø  Actually, stock market is something which can not predict what’s going to happened in the market. So according to me a small investor can be more active if he has an awareness about the rights.

Ø  An investor should make a proper analyze of market and also should study the past record and annual report of the company. After that an investor can take a decision whether to invest or not. If an investor make any wrong decision in selecting the stocks than he may have to suffer a big loss.