Topic 8 Exercise 2 Technical Analysis Behavioral Finance The success of technical analysis depends on trading and pricing patterns that persist over time. A sideways market would tend to give false signals, while a strong trending market would be a good candidate for analysis. It would follow that this market persistence depends on investors behaving in a similar fashion over time. It is obvious that people invest for different reasons, yet they hope to maximize their returns, whatever the motivation for investing. Volumes of research have shown that investors don’t make decisions in rational ways when their money is at risk. Emotions, such as fear and greed, and mental errors can cause stocks and bonds to be overvalued or undervalued. Behavioral Finance has expanded in the last decade as researchers have attempted to identify mental mistakes made by investors and explain market efficiency anomalies. After reading Introduction to Behavioral Finance
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This note was uploaded on 10/28/2009 for the course MBA MBA608 taught by Professor Martin during the Spring '09 term at Beirut Arab University.