ARHIVELE OLTENIEI - Universitatea din Craiova

BEHAVIOURAL FINANCES AND THEIR INFLUENCES ONFINANCIAL MARKETSGHEORGHE BICĂ, MĂDĂLINA CONSTANTINESCU■ Critics of the Behavioural FinancesBehavioural Finances is a new perspective in finances theory, at lest froma point of view, as a response to the difficulty of the traditional paradigm inorder to explain demonstrated effects. Generally, it is said that some phenomenacan be observed and understand better using a model of non-perfect rationalbehaviour. Particularly, these analyses show what is going on when one or morefundamental hypotheses of the rational behaviour individual are relaxed 1 . In atype of a model of behavioural finances, people can not bring up to date theirmentalities in a correct way. In other types of model, Bayes Law is appliedcorrectly; anyway, their decision is not normative compatible with utility ofsubjective due notion.One of the objections manifested against behavioural finances is that wheneven some people behaviour is irrational, majority constituted by rational agentswill prevent the fluctuation to go further from their real value 2 . One of the fruitionof the behavioural finances is the big number of scientific contributions thatdemonstrate how in an economy that includes rational and irrational people, theirrational behaviour can have an important impact on the proceeding assets prices.These contributions known as limits of arbitration represent the first pillar in thesphere of research that is called behavioural finances 3 .Using cleat predictions, behavioural models must identify the irrationaltype. How can deviate behavioural patterns from Bayes Law and the maximisationof the utility of subjective due notion? To respond to such questions, theeconomists consulted experimental evidences of the cognitive psychology. Thiskind of research had demonstrated that some thinks go on systematically, whenpeople bring about their preferences and convictions while they take a decision.The second pillar of the behavioural finances is psychology and the third pillar thebehavioural finances is sociology, frequently neglected, but it is very importantwhen different people are acting on markets, especially in financial markets. Untilnow, implicitly, the assumption was done without any interaction or influences of1 N. Barberis, R. Thaler, op. cit., p. 1053-1123.2 Shleifer, A., Inefficient Markets: An Introduction to Behavioral Finance, OxfordUniversity Press, Oxford, 2000, p. 2 – 5.3 Ibidem, p. 2 – 5.ARHIVELE OLTENIEI, Serie nouă, nr. 21, 2007, p. 341–348