For researches on financial decision-making process of investors, researchers pay most close attention to the psychological factors. The psychological factors research has experienced from the standard decision to the evolution process of decision making, the abstract meaning of decision rules developing into the decision making strategy on the basis of limited rational resources fitting society.
Psychological factors are important factors financial decision-making process of investors. This study introduces four psychological factors to investigate their influence on the financial decision-making process of investors. The results of this study have consistency in the area of cognitive psychology.
The psychological factors research has formed four kind of important points of view. One point is disposition effect which means a reluctance to sell investments after they have fallen in value. A, which is also known as the “breakeven” effect. Another point is Investors’ perception of risk which investors are much more distressed by prospective losses than they are happy aboutby prospective gains. The next point is mental accounting on investment choices which Associating associate a stock with its purchase price. The finally point is mispricing which makes you people stuck in the Gambler’s Fallacy (Shefrin,1999), just like you think that it is more likely for a black number to “hit” after a series of red numbers have hit.
2. Four Psychology Factors
2.1 Disposition Effect
2.2Investors’ Perception of Risk
2.3Impact of mental accounting on investment choices
From the literature review of previous researches and the experiment carried out in this study, Psychology of economy which relates to attitude data is in complete same as economic situation changeable trend, and more significant thing is that the curve of the attitude in the economic situation data which is always changing may be predicted 3 weeks to 6 months ahead of time. This paper argues that: economy and psychology are still in development, they are at a high level of understanding of human behaviors. Therefore, simply giving any positive conclusion may not scientific, and is likely to mislead further research, and scientific attitude may be true, see which is better able to explain the economic behaviors in the human reality. This article does not just economics influence on psychology to review and comment, on the contrary, the main purpose of this article is to briefly review and comb the psychology found and its influence on economics, so as to research in the field, and it is helpful to the development of economics.
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