The process in making financial decisions in the stock market is not affected solely by rational theories. There are many factors that may affect decision-making when tackling the economy. One of these factors is undoubtedly psychological.
This important factor became the topic in a seminar held by BINUS BUSINESS SCHOOL titled rather lengthily: ‘Talking with The Expert – Finance Session: Behavioral Finance in Stock Investing, with Dian Triasurya, MBA – Director/Co-Founder Berkah Capital, Lecturer and Stock Investor’. The event was held in the JWC campus on July 10.
Dian shared his experience of working in the stock market, in which he has been active since 1995. During his career, Dian has met many situations where theories that he learnt did not always affect the decisions he made in the stock market.
“An example is what happened in the 1998 monetary crisis, many people sold their stock, there were also people who did the opposite. These things are common in the stock market and I’ve experienced similar situations related to decision-making for companies. It seems that many decisions are made based on psychological factors and the real character of a person,” explained Dian.
Dian explained that a person’s decision in the stock market is not always influenced by financial theories that the person understands. Psychological factors, characteristic traits, and environmental factors have a large influence in a person’s financial decision-making. This is where behavioral finance plays a role in the financial world, by studying people’s financial decisions through case-studies.
Behavioral finance is a paradigm where the financial market is studied with cognitive psychology. Cognitive psychology explains the ‘irrationality’ of human beings that affects the stock exchange. Cognitive psychologists noted some patterns that are linked with human behavior such as overconfidence, excessive optimism and confirmation bias.
BINUS BUSINESS SCHOOL, through the MM Applied Finance program, tries to facilitate people who want to know more about finance and its application in various industries.
“This kind of session aims to introduce the financial world, which includes the state of the current stock market. That’s why we invited experts and people who understand the industry well to share their experience,” said Ari Barkah, Head of the Graduate Program of Applied Finance. (RAW)
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