Behavioural Finance Research Paper Example | Topics and Well Written Essays - 3750 words

Behavioural Finance - Research Paper Example Montier’s articles and assess them one by one by providing supportive argument. Under this topic, Mr. Montier examined the QWERY keyboards and gave reasons as to why they are still in use today (Shiller 51). It is evident that QWERTY keyboard was established in 1874 by Christopher Sholes who saw the need to reduce the typing speed because the type writer that was in use during those times was jamming of plates in the mechanical arms due to the ease of typing that made people type faster (Thaler 8). Therefore, Mr. Montier clearly explained why the QWERTY keyboard was developed and why it is in use today. He also touched on the concept of Dvorak keyboard which is an alternative keyboard to the QWERTY but it was not adopted because it is efficient than Dvorak and certain studies suggest that the difference in their speed is very low and insignificant. However, Montier’s problem is that with adaptation of QWERTY keyboard up to date clearly implies that the benchmark policy that was used to develop this keyboard limits technological advancement and that, pers onally, he cannot come up with a policy benchmark (Thaler 3). How is technology involved? His reason for not coming up with a policy benchmark is the fact that such policies restrict technological advancements and confine them to one place for a long time (Dopfel 78). The reason as to why I support his argument of rejecting policy portfolios is the fact that they do not interpret investment risks correctly. This is because they concentrate too much on profit making than on the risks involved and the best way to deal with them. Therefore, Mr. Montier’s argument about of typewriters and benchmarks is correct. According to Montier, the notion of investment that was used in earlier times was better than the modernized idea and depiction of investment (Shiller 52). He clearly imply that the main aim of investment in early days was to look for value through purchasing what was

Book Review on 'Predictably Irrational' by Dan Ariely Essay

Book Review on 'Predictably Irrational' by Dan Ariely - Essay Example While as classical economics explains how humans are rational beings who exercise logic in analyzing the merits and demerits of given economic situations with an aim of making sound economic decisions, it does not explain in a perfect way how people behave making economic decisions. In light of this, that Dan Ariely is a new generation scientist that he negates in his predictably irrational book that human beings behave in fundamentally rational ways. Dan Ariely thus uses the everyday experience and detailed and experimentation research to explain how expectations, emotions, social norms, and other invisible, seemingly illogical forces alter individual reasoning abilities. Dan Ariely uses ingenious experiments to explore how irrational forces and social norms influence our economic behavior. He observes that there is a cultural shift in making economic decisions where fewer market and social norms are now more satisfying, creative, fulfilling, and fun. He performs fun filled experime nts on how people buy, sell, and make life time’s decisions thus demonstrating their predictable irrational economic decision making behaviors. This paper draws a clear review of how human beings demonstrate irrational behaviors while making fundamental economic decisions that relate to buying, selling, and other economically driven decisions. Summary of Content The book â€Å"Predictably Irrational: The Hidden Forces That Shape Our Decisions†Ã‚  by Dan Ariely has 15 chapters that discuss the modes of thinking and events that alter the traditional  rational behavior in making economic decisions. Dan Ariely explains the truth about relativity confirming how humans frequently regard their environment in relation to others (Ariely 10). In doing this, people compare things that are easily comparable in arriving at certain decisions. He goes ahead to explain this comparison by giving examples of three honeymoon destination options two in Rome and one in Paris. He uses thi s example to describe the decoy where consumers tend to have a specific change in preference between two options when a third option surfaces. In light of this, Dan Ariely explains how relativity can help people make wise decisions and at the same time demeaning their lives. He relevantly notes that when people compare their lives to those of others in the same category, they tend to manifest envy and jealousy. He equally reckons that human beings rarely get satisfied and the more they get the more they aspire to get more. However, he notes that we can avert this by avoiding relativity by controlling the happenings around us. Dan Ariely explains the fallacy of supply and demand where consumers consider value, quality, or availability before making a purchasing decision. He notes that recommending a value to an item with no initial value leads to irrational pricing. He observes that although prices apply arbitrarily, consumers tend to anchor with those prices upon their first purchas e. Indeed, the customers associate with this price for a long time affecting their social value and thus irrationality in price. Ariely hence uses the arbitrary price anchoring to challenge supply and demand theories saying that demand is subject to manipulation and thus affects market equilibrium. He therefore concludes that market equilibrium relies on consumer’s memory and not preferred choices. He further explains the cost of free notion where people choose free options in place of