Is behavioural finance here to stay?
I believe there is still a lot of momentum about alternate theories of modelling financial markets, behavioural finance being one of them. I don’t believe that given what has happened there has to be a reassessment of what role EMH and CAPM has to play in the future and as such financial theory now has to evolve. However, whether this will mean a more central role for behavioural finance in the long term is another question. Instinctively for me, the influence of collective behaviour on financial markets and the role it plays in the creation of asset price bubbles is too important to ignore. It surprises me then that I have found a limited amount of well developed behavioural finance theories and analysis. Surely, a more considered approach to this discipline would be of benefit to government regulatory, monetary and fiscal authorities, not to mention active investment managers. Nevertheless, in spite of the increased interest in behavioural finance and the inability of traditional the
