The entropy theory implications in behavioural finance

Understanding the decisional phenomenon in the modern capital markets is impossible nowadays without the psychological component of the investor’s attitude. A large number of the behavioural finance theories are based on a limited number of psychological biases, in order to build the foundation of the investor decision. In this context, the proposed paper uses the entropy law (one of the universal laws applicable in informational field beginning from 1870) as a way to approach the investor’s attitude.entropy theory, behavioural finance, investor's attitude

CLASSICAL LASSICAL AND BEHAVIOURAL FINANCE IN INVESTOR DECISION

Conceptual model of individual investor behavior presented in this paper aims to structure a part of the vast knowledge about investor behavior that is present in the finance field. The investment process could be seen as driven by dual mental processes (cognitive and affective) and the interplay between these systems contributes to bounded rational behavior manifested through various heuristics and biases. The investment decision is seen as a result of an interaction between the investor and the investment environmentinvestor behaviour; financial decisions making; cognitive modelling,;sentiments; market efficiency

The volatility of the European capital markets during the curent financial crisis:what are saying the empirical evidences?

The uncertainty about the market’ evolutions are one striking characteristic of the financial crisis. The objective of this paper is to find some evidences for the pre/ crisis periods actual shifting in volatility for some major European markets. The methodology is based on two particular measures of volatility and in structural changes tests. The main output consists in the thesis that “volatility matters” for an extended financial crisis explanation.volatility, financial crisis, Quandt-Andrews test, FTSE 100, DAX, CAC 40

The pattern of Euronext volatility in the crisis period: an intrinsic volatility analysis

The pathology of the financial instability is inter alia characterized by structural changes in the market prices’ volatility. Such changes are the expression of investor’s uncertainty in regard to the market’s dynamics and lead to systematic anticipation errors. The objective of this paper is to study the modifications in the most significant European index -EURONEXT, in the aftermath of financial crisis. The methodology consists in the estimation of the so called intrinsic volatility in index daily data, during pre and current crisis period. Also, it is a study on the structural changes in this volatility based on Quandt-Andrews Break point test. The main output consists in the thesis that for the financial crisis’ period there are specific rapid adjustments in short run anticipations and the appearance of global picks in market dynamicscrisis volatility prices structural changes

RECENT EVOLUTIONS OF THE ROMANIAN CAPITAL MARKET IN THE CONTEXT OF FINANCIAL CRISIS

The favorable institutional and functional evolution of the Romanian capitalmarket was break out by the negative consequences of the financial crisis. Thus, the objectiveof this paper is to analyze the current evolutions and to identify some of the crisis’ pathologycharacteristics. Some conclusions are drawn and some further research directions areindicated.Romanian capital market, financial crisis, Quandt-Andrews test, BET, BET-C, BET-FI

The Romanian Financial Market and the Financial Markets from EU - A Integration Analysis

Integration has become a second nature of Europeans.. Day-in, day-out, we experience more worldwide integration of markets and this will further develop as –in the end – it will mean real tangible benefits for all stakeholders involved. One of the most important parts of the integration process is the financial integration which could be seen as a complex process which involves institutional, functional, structural and behavioural aspects. The aim of this paper is represented by the assessment of the financial integration degree between the Romanian financial market on the one side and the EU financial markets on the other side, analyzing all the four aspects mentioned above. The final conclusion that could be drawn is that the Romanian financial market integration registered in the last period (especially in the period 2004-2005) a large progress which marks the “maturation” of the national financial market. Despite of these progresses, some significant divergences could be still seen and in consequences this process has to be continued with some further simulative mechanisms.financial market integration, institutions, structures, functions, behaviours

The Analysis of the Bucharest Stock Exchange Financial Sector

The Romanian financial market has passed in the last years through a large “maturating” and consolidation process which has created an unfinished architecture, harmonising step by step with the capital markets from European Union. One possible way to analyse the empirical characteristics of this architecture could be the sectoral approach of the distribution, informational efficiency and volatility, synthesised by the index’s dynamic. This paper is oriented on the financial sector of the Bucharest Stock Exchange, reflected in the BET-FI index because this sector has gone through important changes during the last few years, becoming very attractive for the individual and institutional investors. The paper offers an analysis of the static proprieties of the BET-FI index and of the way the financial sector positioned in respect to the other sectors, as well as to the whole capital Romanian market (done through a co-integration between the BET-FI index and the others main indexes of the market namely BET and BET-C). The main results show an asymmetrical distribution of the BET-FI index, bring some evidences of a weak form of sector efficiency, and identify the presence of connections between the BET-FI index and the other indexes. Also some important mutations of the BET-FI short term volatility are registeredcapital market, efficiency, co-integration, volatility, rational behaviour

The Dark Side of Digitalisation: Wealthier but Unhappier

Since the first industrial revolution, the world economy has passed a turmoiled path with many salient transformations that have shaped today’s human relations, commercial trades, innovation and governance. Now, humanity is going through the digital revolution, which seems to change the world even more rapidly than its predecessors. Despite the myriad of digitalisation advantages connected with this, one cannot neglect the downsides. Terms such as technostress, cyberbullying or technology addiction emerged to express the harm the accelerated digitalisation has brought into our lives. The present paper focuses on digitalisation’s effects on happiness, using a VAR model for the EU countries from 2017-2022. Despite the positive effect on economic growth underlined in the literature, a positive impulse in terms of digitalisation generates a persistent negative effect on happiness in the next three years

Digitalisation and Happiness in the European Union

Digitalisation is for sure one of the most pervasive and significant transformations that humanity has undergone in the last decade. Technology changed how we see and relate to the world, the interhuman relationships and represented an essential catalyst for innovation and development. The paper aims to analyse the relationship between digitalisation (overall and its components) and happiness in European countries from 2017-2022 using an OLS naïve panel model and Granger causality. The results show that, overall, digitalisation has a negative impact on happiness. At the same time, Internet user skills, Fixed broadband coverage, Mobile broadband, and E-government seem to be the digitalisation components with the most significant impact on happiness

Seasonal affective disorder and the Romanian stock market

A large number of studies conducted in economic psychology, cognitive sciences and behavioural finances support the idea that economic actions are not a result of a rational utility maximising behaviour, but seem to be driven by other factors, such as personality traits, psychological factors, gender, age and genetic heritage. In this context, capital markets are sometimes non-efficient and an anomaly-based trading strategy could be used to enhance the returns, especially in the case of emergent markets. This article analyses the presence of the Seasonal Affective Disorder (SAD) effect on the Romanian stock market, in a time span that includes calm, growth periods and volatile periods as the one of the 2008 global financial crisis. The results support the existence of a correlation between the number of hours of daylight and market returns before and after the last financial crisis, even if the effect seems to change after the crisis