Home  Journals  Finance and Credit  4(580) - 2014 January

Behavioral finance: application of the theory of prospects in management of finance

Available online: 29 January 2014

Subject Heading: Financial management

JEL Classification: 

In the article it is noted that behavioral finance is the direction of the financial theory, an object of research and which modeling the irrational component of adoption of financial decisions in the conditions of risk and uncertainty is. It is emphasized that the theory of prospects is the most rational theoretical model of value judgment of risk within adoption of the relevant financial decisions. Difficulties of its application are connected with an insufficient readiness of methodology of definition of such significant investment concepts, as «a reference point», «prize» and «loss». Most the theory of prospects is used in management of finance.

Keywords: behavioral finance, theory of prospects, cost function, weighed probability, narrow frame

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ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

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