Theory of Behavioral Finance and Its Application to Property Market: A Change in Paradigm

It is considered that behavioral finance is basically the extension of behavioral economics. It is specially related to the arena of thinking of investor and his mind towards the stock market. The main objective of this study is to define the emotions based theories which are used to explain the stock market problems and terms. It is also critically analyzed the issues related property for behavioral research and the theory of behavioral finance. After the analysis of this paper we came to know that investors cannot always motivated by emotions, and it is not necessary that the property market will only be sufficient at the weak form efficient. There is a need of deep analysis for the theory of behavioral finance. The two major concepts of behavioral finance are discussed by this paper. First, investor psychology and limit to arbitrage. Next, the theories related to psychology used in behavioral finance both are reviewed. The identification of issues related to property market is made possible by the analysis of behavioral finance theories and development. This analysis is useful to understand these theories by using behavioral model. Investor always want to invest in those projects which having greater profit and the minimum chances of loss or risk. So this psychology of investor is also discussed in behavioral finance. It is also considered the feelings and thinking errors which encourage the investors and process of making decisions. Next the paper will discuss about the human behavior theories which can motivate or demotivate the human’s