Method of Forensic Accounting
Durham E-Theses
Three essays in behavioural nance: An examination into non- Bayesian Investment behaviour
ANTONIOU, CONSTANTINOS
How to cite:
Three essays in behavioural nance: An examination into nonBayesian Investment behaviour, Durham theses, Durham University. Available at Durham E-Theses
ANTONIOU, CONSTANTINOS (2010) Online: http://etheses.dur.ac.uk/428/
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Academic Support O ce, Durham University, University O ce, Old Elvet, Durham DH1 3HP e-mail: e-theses.admin@dur.ac.uk Tel: +44 0191 334 6107 http://etheses.dur.ac.uk
2
Abstract
Thesis Title: Three essays in behavioural finance: An examination into non- Bayesian Investment behaviour by Constantinos Antoniou
“There is no general principle that prevents the creation of an economic theory based on other hypotheses than that of rationality” Kenneth Arrow (1986)
Behavioural Finance relaxes the neoclassical assumption that investors consistently apply Bayes Rule when updating their expectations, and identifies the behavioural attributes that affect asset prices. This thesis extends this literature by examining deviations from the Bayesian model that arise due to i) ambiguity aversion, ii) investor sentiment and iii) decision heuristics. Bayesian Updating assumes that investors are able to always estimate a single generating process for expected returns. However, in reality investors analyze noisy information
Three essays in behavioural nance: An examination into non- Bayesian Investment behaviour
ANTONIOU, CONSTANTINOS
How to cite:
Three essays in behavioural nance: An examination into nonBayesian Investment behaviour, Durham theses, Durham University. Available at Durham E-Theses
ANTONIOU, CONSTANTINOS (2010) Online: http://etheses.dur.ac.uk/428/
Use policy
The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-pro t purposes provided that:
• • •
a full bibliographic reference is made to the original source a link is made to the metadata record in Durham E-Theses the full-text is not changed in any way
The full-text must not be sold in any format or medium without the formal permission of the copyright holders. Please consult the full Durham E-Theses policy for further details.
Academic Support O ce, Durham University, University O ce, Old Elvet, Durham DH1 3HP e-mail: e-theses.admin@dur.ac.uk Tel: +44 0191 334 6107 http://etheses.dur.ac.uk
2
Abstract
Thesis Title: Three essays in behavioural finance: An examination into non- Bayesian Investment behaviour by Constantinos Antoniou
“There is no general principle that prevents the creation of an economic theory based on other hypotheses than that of rationality” Kenneth Arrow (1986)
Behavioural Finance relaxes the neoclassical assumption that investors consistently apply Bayes Rule when updating their expectations, and identifies the behavioural attributes that affect asset prices. This thesis extends this literature by examining deviations from the Bayesian model that arise due to i) ambiguity aversion, ii) investor sentiment and iii) decision heuristics. Bayesian Updating assumes that investors are able to always estimate a single generating process for expected returns. However, in reality investors analyze noisy information