This paper uses the cross-sectional variance of the betas from the CAPM model to study herd behavior towards market index in Romania. For time-varying beta determination, three different modeling techniques are employed: two bivariate GARCH models (DCC and FIDCC GARCH), two Kalman filter based...

About 21 years after establishment of the first Islamic banks in Indonesia, the share of Islamic banks is still small. About 86 percent Indonesian are Muslim, yet the asset share of Indonesian Islamic banks is only about 4 percent. Since Islamic scholars unanimously argue that bank interests are...

Behavioral finance studies the application of psychology to finance, with a focus on individual-level cognitive biases. I describe here the sources of judgment and decision biases, how they affect trading and market prices, the role of arbitrage and flows of wealth between more rational and less...

Each economic actor is characterized by his own evaluations, traits, and strategies. Although heterogeneity of economic actors is widely acknowledged, little is known about the factors causing it. In this paper, we will examine the behavioral bias known as myopic loss aversion, and the...

Recent research in neuroeconomics suggests that the same brain areas that generate emotional states are also involved in the processing of information about risk, rewards and punishments. These findings imply that emotions may influence financial decisions in a predictable and parsimonious way....

Investment behavior is traditionally investigated with the assumption that risky investment is on average advantageous. However, this may not always be the case. In this paper, we experimentally studied investment choices made by students and financial professionals under favorable and...

When investment is repeated, previous outcomes (winning/losing) as well as the current budget level (gain/loss domain) influence decisions. The first is related to the so-called "gamblers fallacy". The second to value function relative to some reference point. Both effects have been extensively...

Savings accounts are owned by most households, but little is known about the performance of households’ investments. We create a unique dataset by matching information on individual savings accounts from the DNB Household Survey with market data on account-specific interest rates and...

Pension reforms are on the political agenda of many countries. Such reforms imply an increasing responsibility on individuals’ side in building an efficient portfolio for retirement. In this paper we provide a model describing workers’ choices on the allocation of retirement savings in...

This paper explores the existing pattern and the levels of disparity of the functional financial literacy in the Sri Lankan context. The study, mainly using quantitative data, selected the sample representing the three main settlement types: urban, rural and estate sector using multi-stage...