HEURISTIC AND PROSPECT FACTORS INFLUENCING INVESTMENT PERFORMANCE OF INDIVIDUAL INVESTORS
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Abstract
Most traditional financial theories consider investors as rational decision makers. This means that
when investors receive information, the investment decision is taken accordingly based on the new information.
Description
The traditional theory of finance assumes that investors are rational, and they follow the basic rules of risk and return in making their investment decisions. However, behavioral finance states that investors are in fact irrational, and are largely influenced by behavioral factors that introduce biases in their decisions.