Cognitive Biases and Instability of Preferences in the Portfolio Choices of Retail Investors Policy Implications of Behavioural Finance

摘要: Classical financial theory assumes that individuals are perfectly rational and act by usingcomplete homogeneous information sets. For a long time, this has been used both ondescriptive normative grounds. However, empirical research shown thatinvestors systematically commit reasoning or preference errors hard to reconcile with therationality assumption. These reflected in “behavioural anomalies” leadretail investors low participation the equity market, perception of risk-returnrelationship, poor portfolio diversification excessive trading. This papersurveys discusses insights behavioural finance help us understandobserved anomalies using theoretical apparatus cognitive psychology andexperimental evidence. insights, providing review real perceptions ofphenomena psychological irrational components at basis individualchoices, may be helpful strengthen efficiency regulation andsupervision. In particular, education vein can toimprove investors' capacity judge raise their understanding most seriousbehavioural “traps”. The contents presentation format disclosure on thecharacteristics products also lay themselves open geared theprescriptions finance. Finally, advice is an indispensablesupplement for guiding make decisions best serve interests forstrengthening regulation; advisors should thereforeendeavour customers contain common errors. Thepurpose work stimulate debate analysis abovementioned policy issues, order instruments madeavailable understand characteristics products.