发帖
雷达卡
Introduction
Modern finance theory that can date back to half a centuryis no longer modern, whereas the behavioural finance has become more prevalentthan it once was (Statman and Thaler). The behavioural finance definesbehaviour of investors as rational or irrational (Ackert and Deaves). Shiller’sIrrational Exuberance declares that financial bubble is a tautology, forexample, from the first bubble: Tulip Mania that happened in the Netherlands tothe latest one: Real-estate Bubble in the USA. Also, he states that theexplosion of bubble exists due to the public’s interests that change from onenew item to another new one. Besides, Wieland demonstrates that monetary policymay face challenges that will probably undermine the efficiency ofimplementation due to uncertainties. Szyszka indicates that the regulatorysectors ought to be responsible for maintaining the stability of financialmarkets, because regulation and policy plays a role in affecting financialbehaviour. Studies (Ackert and Deaves; Coleman; and Holland) indicate that theproblematic financial behaviour by investors such as incorrect decision-makingwill derive market imperfections, leading to an increase of systemic risk thatcould break down financial systems. Moreover, market information is adeterminant that influences investment decision-making (Holland; and Daniel andTitman). However, evidence (Thomson and Buckle; Chen et al.; and Healy andPalepu) identifies that asymmetric information and misunderstandings oninformation will possibly increase market risk, this enables financialbehaviour to be more irrational.
Substantial previous studies as mentioned above suggest thatinvestment decision-making based on information may generate marketimperfections, causing an irrational market. Thus, it is necessary to discoverthe processing of information while making investment decision, which may bebeneficial in developing market efficiency.
Literature review
Factors that influence investment decision-making
Both external and internal elementscan derive impacts on investment decision-making. As stated by Shiller, changesof public preference are a key factor that affects financial behaviour. Forinstance, the shifting risks and failures of financial institutions increasedafter the Financial Crisis because the market perception has changed (Gendronand Smith-Lacroix). Additionally, the economic environment can change financialactivities and investment strategies (Berger and Udell). Gerding and Howellsand Bain demonstrate that monetary policy and regulation will cause differentdecisions made by financial institutions and investors. According to Swank, theproblems of policymaking mainly stem from market uncertainties and bias ofpolicymakers. For example, the US government began to cut the capital gain taxrate in 1997, and the rate decreased by 15% in 2003, which essentially affectedinvestors’ forecasts and enabled them to hold capital assets continuously(Shiller). Meanwhile, this also caused a large number of funds flowed intohousing markets, which may be the key element that resulted in Sub-prime Crisis(ibid).
Apart from this, some studies(Coleman; Volberda et al.; and Bergerand Udell state that there is an interaction between external and internalfactors. For instance, the improvement of technology has altered businessmodels, financial performance and activities in current decades (Neave). Thisprovides an opportunity for financial institutions to improve contextualconditions thereby reducing communication gaps, which can influence the processof exchanging information. Also, organisational structure will possibly affectdecision-making. The evidence supports that large company tends to analyse‘hard’ information, whereas small company has an advantage of handling ‘soft’information (Chen et al.; Holland;Thomson et al.). Moreover, accordingto Barker, the analysis of individual investors is mainly based on institutionreports. Thus, different processes of analysis and accesses of collecting dataought to be the driver of making decisions.
Main factors that influence information analysing
The existence of financialintermediary is to reduce or eliminate informational asymmetries (Buckle andThomson). However, problems of financial behaviour such as adverse selectionand moral hazard are likely to disturb the dissemination of information in acorrect way thus increasing the difficulties in the process of informationanalysing (Buckle and Thomson; and Holland). That enables financialinstitutions to offer unique services to their clients and encourages investorsto invest in information (Sanghavi and Hajek). Since market information stemsfrom institutions’ reports and analysts, and also individual behaviour can beoffset via teamwork (Claver- Cortés etal.; Merton and Bodie; and Barker). Thus, there is a concerning forrealising how fund managers and analysts to understand relevant information. Chenet al. and Volberda et al. indicate that institutions areexpected to improve knowledge that could generate degrees of individualcapabilities and characteristics in order to achieve healthy contextualconditions. Holland implies that communication gaps between front and backoffices and top management and bottom-line employees would lead tomisunderstandings on information in a firm due to the different accesses ofcollecting information. Guo et al. andHolland suggest that learning and creating new knowledge will benefit themanagement of processing and exchanging information, because this may providemore opportunities for managers and employees to communicate effectively.
The development of technology is abridge for institutions to connect their business globally, and the Internetprovides a close linkage for people, who are living in different countries.Research (Lin et al.; Scholtens andWensveen; and Guo et al.) shows thatknowledge can help people to learn and understand technology better. Buchananand Huczynski state that firms can apply technological system in order toreduce the difficulties of receiving information in the stage of communicating.Also, this will help companies to spread culture and central value thus shapinga strong reputation in public and enforcing relationships with clients (Need;and Carlsson). Coleman demonstrates that reputation enables companies todisclose more intangible exposures therefore market imperfections could beeliminated. Holland suggests that misunderstanding is a key factor that generates‘information mosaic’, leading to a ‘near’ efficient market.
Note: It's the main part of my research proposal, hoping it could give some insights of financial market.
提升卡
置顶卡
沉默卡
变色卡
抢沙发
千斤顶
显身卡
京公网安备 11010802022788号
