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Behavioural finance is an area of study focused on how psychological influences can affect investment decisions and market outcomes. Required: A) Discuss some of the
Behavioural finance is an area of study focused on how psychological influences can affect investment decisions and market outcomes. Required: A) Discuss some of the irrational behaviours displayed by investors according to behavioural finance. (20 marks) B) Darren has been quite successful in investing for the last 30 years. When asked about the secret of his success, he mentioned the followings: "Investing in share market is not difficult. I am very confident about my skill in identifying the winning shares. A few rules that I am following have given me success in investing: First: when in doubt, follow the majority. For example due to current situation, healthcare shares are hot. So I will follow the majority to buy these shares. Second: share prices will go up and down, so if I made losses on some shares, I will hold onto them. Sooner or later the share prices will recover and move higher. Third: When I made some gain, I will take more risk to invest my gain in order to make higher return. Afterall it is not my money, and my capital is still intact." Indicate and explain the behavioural finance concept that Darren exhibited
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