Behavioral Finance Heuristic and Judgment, a literature review Essay

Behavioral Finance Heuristic and Judgment, a literature review - Essay Example In subsequent studies, Fama (1998; with French 1992/1993/1996) and Malkiel (1995) showed empirical evidence proving these conclusions and the observation that in efficient markets, only those that arrive first can earn above average returns. This logic that consistently beating the market is impossible (returns are so low that most will go to trading fees and commissions) led to the creation of index funds that mimic market performance. On the other side are the behavioral finance academics who claim that capital markets are inefficient, citing observable market anomalies showing that stock price behavior is predictable, that investors are irrational, and that many can earn above average returns or beat the market (Shiller 1981/1990/2000). Barberis, Shleifer and Vishny (1998) claim that in the ongoing battle between rational and irrational traders in the market the irrational ones are dominating. The systematic errors that irrational investors make when they use public information to form expectations of future cash flows overwhelm the efforts of rational traders to undo the former's market dislocating effects. Daniel, Hirshleifer, and Subrahmanyam (1998) state that irrational traders' overconfidence in interpreting private information pushes up prices above rational fundamentals and increases market inefficiency. Behavioural finance studies are backed by empirical evidence showing market inefficiency caused by limits to arbitrage (Shleifer and Vishny 1997) and behavioral psychology, both individual (Shleifer 2000) and collective (Hirshleifer and Teoh 2003), as factors that explain inefficient market behaviour. One stock anomaly cited as proof of market inefficiency is the so-called January effect that can be stated simply as "stock prices tend to go up in January" (Gultekin and Gultekin 1983). Thaler (1987) and Shiller (1997) attributed this to psychological factors as investors are influenced by their own mental compartments. Fama (1998) claims that conclusions based on market anomalies discovered by behavioral finance are due to poorly done statistical work and amateurish techniques. He cited above average returns as the result of chance, that behavioral finance models are loaded with judgmental biases making it predictably easy to justify any hypothesis proposed, and that the efficient market hypothesis can explain all forms of market behaviour to date. Nevertheless, despite the voluminous literature on the topic, both efficient markets and behavioral finance proponents agree that their models have not managed to fully explain capital markets behavior. Sharpe, a 1990 Nobel Prize winner who supports both theories said that "as a practical matter it is prudent to assume the market is pretty close to efficient in terms of pricing and risk and return On the other hand, we have learned from cognitive psychology that ordinary human beings needalternatives

Urban Planning Perspectives Essay Example | Topics and Well Written Essays - 1750 words

Urban Planning Perspectives - Essay Example Today 'community' is another name for paradise lost but for a paradise which we still hope to find, as we feverishly search for the roads that may lead us there.† Bauman, Z., 2001, Seeking Safety in an insecure world, Cambridge: Polity Press, pp.1-3 1. Discuss with reference to recent Labour and current Liberal/ Conservative coalition policy initiatives in the fields of neighbourhood regeneration and planning. The property-led urban regeneration that has dominated urban policy during the Thatcher governments was characterised by the removal of many constraints to corporate investment in cities, including the minimisation of local government and community involvement in planning and other regulatory controls. Despite the decades of urban policy, a prominent feature of British cities appeared the stark inequalities between rich and poor neighbourhoods with significant differences in terms of deprivation, levels of mortality, crime, educational attainment, or per capita income; wh ich have particularly been in relation to ethnic and other, geographically segregated and socially excluded groups (Imrie and Raco, 2003, pp. 3-4). Not surprisingly therefore, the Labour came to power in 1997 with a highly ambitious bid â€Å"to regenerate Britain’s cities by recourse to social inclusion, neighbourhood renewal and community involvement† (Imrie and Raco, 2003, p.4). ... d Renewal Fund (NRF) provided nearly 3 billion pounds to some of the most deprived authorities in England, perhaps the most significant initiative operated by the NRU became the New Deal for Communities (NDC). The idea behind the NDC partnerships has been to produce a local response to five key indicators of social deprivation – unemployment, educational under-achievement, crime, poor health and housing, and the physical environment, although the NDCs were lacking major resources for large-scale rebuilding programmes (Jones and Evans, 2008, p.20). The critical reception NDCs have received was due to intentions and actions being at cross purposes – as the targets have been set locally, the locally agreed targets were subsequently rejected at national level. The creation of Local Strategic Partnerships (LSP) – being run by representatives from partner organisations, like local authorities, local police authorities, alongside health and education sectors, etc. - is believed to have further reinforced the tension in community policy; while the NDCs are targeted to specific areas, the LSPs take a larger-scale overview. On the other hand, being considered a low profile and with tendency to take credit away from elected politicians, the local community-led initiatives have been overshadowed by prestigious projects like the ‘Northern Way’ - a strategy for regional development in the North of England, published in 2004 (Goodchild and Hickman, 2006, pp.121-133). During the economic downturn in 2008, a gradual reduction in resource for and attention on policy initiatives has been compounded, and reached its peak at the announcement of the Comprehensive Spending Review in October 2010 (Broughton, K., Berkeley, N. and Jarvis, D., 2011, pp.85-86). The dramatic change in

Macroeconomic Analysis of South Africa Research Paper

Macroeconomic Analysis of South Africa - Research Paper Example Hospitality Segment in South Africa Similar to any other industry, the hospitality industry has to face a significant impact due to the economic condition in any country. The economic conditions prevailing within an economy determines the trend of travel and thus the profitability of hospitality sector. Hotels require a major financial investment. Nevertheless, financial suppliers necessitate guarantee that the hospitality organizations are satisfactorily feasible to repay the invested amount. The situation of hospitality market is generally determined by income per room and occupancy rates. Increasing occupancy rate in hospitality industry denotes high demand which can open the opportunity for new entrants in the hospitality industry. It is worth mentioning that the hospitality industry is directly related with national as well as distant travelling trends for tourists and commercial visitors (PwC, 2011). Hospitality organizations can gain high return on investment in the presence o f strong and healthy economy. For instance, the macroeconomic factor such as growth rate has major impact on the travel because it entices and preserves customers and drive sales within the industry. Furthermore, the condition of economy creates an impact on both domestic as well as global corporate travel. It is in this context that South Africa has satisfactory demand for hospitality services. With the virtues of the macroeconomic environment prevailing in the business context of South African hospitality industry, the number of overnight visitors in South Africa has increased considerably from 2004 to 2006 by almost 10.23 million. The increase in number of travel has accelerated the room occupancy rate as well as hotel revenue (PwC,...This paper is one of the best examples of the macroeconomic analysis of South Africa, and the overview of its current state of hospitality segment. Even though the financial structure of South Africa is improving, it is facing two most important macroeconomic problems (i.e. unemployment and electricity) which can have a substantial impact on the industrial development of the economy. The paper analyzes the extent of these problems and how the government reacts with the problems through developing macroeconomic policies. Furthermore, the paper also describes the hospitality industry in South Africa and its relationship with current macroeconomic issues faced by the country in order to understand the potentiality of instigating a new venture in the particular industry. South Africa is regarded as the economic centre of the African continent. It has outstanding and advanced legal structure. The financial system of South Africa is observed to be in a healthy position. South Africa is not only considered as a major developing economy, but is also as the gateway to other African markets. In the region, South Africa plays a vital part for energy generation, transportation, industrialization and hospitality services. Similar to any other industry, the hospitality industry has to face a significant impact due to the economic condition in any country. The economic conditions prevailing within an economy determines the trend of travel and thus the profitability of hospitality sector. Analysts predict that South Africa will remain economically attractive for tourism and hospitality sector. Even though there are some unemployment and electricity shortage issues in the country, its overall market attraction is satisfactory.