Behavioral Finance- And the Change of Investor Behavior during and After the Speculative Bubble At the End of the 1990s Authors

The apparent high valuations in the aggregate market and the high price earnings ratios, experienced in the equity markets at the end of the 1990s, can be characterized as a so-called speculative bubble. The existence of such a phenomenon can in part be attributed to less-thanrational aspects of investor behavior and human judgment. The purpose of this thesis is to conduct a research on how private as well as institutional investors have changed their investment behavior as a consequence of the speculative bubble during the period from fall 1998 to March 2000. Our purpose is to establish what factors lie behind the speculative bubble and further investigate whether the investment objectives and factors influencing investment decision-making are different today than during the speculative bubble. Behavioral finance provides the fundamental theoretical framework for this thesis. The empirical research is based on a questionnaire directed towards active private investors in Sweden, more specifically members of the Aktiespararna Association, and institutional investors mainly resident in southern Sweden. The results obtained suggest that the behavior of market participants during the speculative bubble was to some extent irrational and that the composition of investments has changed as