Behavioural finance is a new approach to financial markets that has emerged in response to the Difficulties faced by the traditional investors. In general terms, it is argued that some financial performances can be better understood using models in which some agents are not completely rational. More specifically, it analyses what happens when we relax one, or both, of the two concepts that underlies individual rationality. In the model of behavioural finance it is understood that agents fail to update their beliefs correctly. In other models, agents make choices that are normatively Questionable. This paper gives a glimpse to behavioural finance, describes the background, aim and objectives of investor behaviour. It begins with a description of standard as well as behavioural finance, which often contradicts the modern financial theories and goes on to test the theories of risk aversion and anchoring using the Chi square test and finally gives some concrete conclusions and suggestions on how investors must behave in a volatile market scenario.
Key words: Financial Theory, Indian Investors, Stock Analysis, Anchoring theory, Loss aversion
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