The Investor in the course of time

The Investor in the course of time

The Economy continued to strengthen its foundations for more than two centuries on the behavior of the Homo Oeconomicus. In 1776, Adam Smith published the work “The wealth of Nations” laid the Foundation for a new science, but designed at the same time, the image of the “desired” market participant in the Form of the much-vaunted Homo Economicus.

The concepts and models of economic theories, management methods and leadership principles are based in many areas on the premise that the person behaves in fact as it was adopted by Adam Smith. The first reviews the compliance with the Animal Spirits of John M. Keynes remained largely unheard.

With each model, with almost every new a result there were increasing over the course of the 20th century. Century, the contradictions between the theoretical guidelines and the observable behavior of market participants. The market participants seemed to be less on the maximization of self-interest is interested in, but rather to the orientation of its reactions to fair or unfair actions of the other people in his environment.

Due to the increasing insight that the market participants do not conform to the set Ideal, it’s the Foundation on which the neoclassical capital market theory is based, more and more. The scientific community is working to adapt the rational Homo Economicus of modern economic world closer and to correspond to its market participants.

The market participants in the sense of Homo Economicus Humanus is no less interested in the maximization of self-interest, but rather to the orientation of its reactions to the actions of other individuals.

The Text comes from the UTB-book Behavioral Finance by Rolf J. Some and Máté Facsar. The Textbook suggests first of all, the arc of the neo-classical view of financial markets Behavioral Finance. Then, speculative bubbles, from the Tulip mania until the Subprime mortgage bubble has to be presented as evidence for bounded rationality in financial markets in detail. After that, the heuristics in investment decisions in the securities markets are in the foreground. The resulting distortions can be classified according to their risk/return harmfulness in the context of the RRS-Index®. Finally, examples for the application of the Behavioral Finance knowledge in Wealth Management, and Corporate Governance are discussed and it is thrown a look at the latest developments in the Neuro-Finance and Emotional Finance.

Rounding out the Textbook a web-based knowledge Check, with which the readers can check their learning progress.

Article image: © Kurt F. Domnik /