Abstract:
Although finance has been studied for thousands years,
behavioral finance which considers the human behaviors in
finance is a quite new area. Behavioral finance theories, which
are based on the psychology, attempt to understand how emotions
and cognitive errors influence individual investors’ behaviors.
The main objective of this study is to exploring the factors
that were affecting the stock prices volatility, in which
efficient market hypothesis were more important factor that
affects the stock prices volatility with respect to behavioral
finance, due to lack of information in the stock market,
investors unwilling make decisions on the basis of psychological
factors such as human emotions, feelings and attachments. Past
firm performance is another were major factor, whenever
investors willing to purchase or sell any particular stocks they
first need to analyze the overall performance of the firm. Such
as firm dividend history, firm earnings, this whole study
indicate that investors are more interested towards firm past
performance. Last but the not least factor were macroeconomic
factors such as inflation and interest rate, form investors
point of view the interest rate and inflation were more
important, as investors reacted positively when interest rate
are less because they had more opportunity to invest in the
stock market.
This study also tries to find out correlation that there is
positively relationship between behavioral finance and efficient
market hypothesis, firm performance and macroeconomic factors.
