ROLE OF BEHAVIOURAL FINANCE IN INDIVIDUAL INVESTOR INVESTMENT DECISION IN THE FINANCIAL MARKET

Abstract

There are mainly two disciplines of financial market study viz. Conventional Finance and the recent development is known as Behavioural Finance. Conventional finance foundation is mainly based on an efficient market, Investor rationality, and the modern portfolio theory developed by Markowitz. But till 1990 the conventional finance theories were not so been challenged. But from the mid-90 researchers have shown many shortcomings of the existing theory and particularly challenged the investor rationality concept. As a result, a new paradigm known as behavioral finance has been developed. In this paper, an attempt has been made to highlight the shortcomings of the traditional finance theories as pointed out by behavioral finance supporters and also a discussion on the significance of behavioral finance.