Behavioral finance and selected aplications on the capital market

The thesis will focus on the topic of behavioral finance questioning the postulates of traditional economic theories at both the individual level, which is directed against the normative Expected utility theory, and at the global level, where behavioral researchers dispute the validity of the Efficient market theory. I will describe theoretical characteristics and background and present own empirical analyses at both levels. At the individual level I will examine the most common behavioral biases and their impact on investor behavior. These documented psychological and emotional distortions of human behavior cause, that people in reality do not always act fully rationally like homo economicus. Using the empirical evidence from questionnaire I will study the decision-making process and tendency to undergo selected biases. Furthermore, on the global level behavioral finance proponents argue that the market can not self-correct the distortions caused by irrational individuals and therefore can not be effective. The thesis will also analyze one of the documented calendar anomalies called the Halloween effect, as they serve as a basis for argumentation of behavioral economists. The result of empirical research based on international stock market indices will follow up comparison of the developed markets in USA, England, Japan and Germany with emergin markets.