Financial Management: Rational Decision-Making, Investment Strategies, and Behavioral Insights

In this theory we will discuss about financial management and below are the summaries point:- Traditional financial theory suggests rational decision-making in investment strategies. Modern theory recognizes that investors' financial decisions are often inconsistent and driven by cognitive illusions. Behavioral investment is gaining importance in decision-making to minimize emotional biases and improve performance.

Running head: FIANCIAL MANAGEMENT
Financial Management
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Table of Contents
The rational decision-making process applied to investment strategies....................................2
Investment Strategies for Long-Term Optimal Growth.............................................................3
How Fairness And Ethics Can Be Applied To Investment Decisions.......................................4
Reference:..................................................................................................................................5

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The rational decision-making process applied to investment strategies.
Under the traditional
financial theory, the
decisions makers are
rational. In
contrast, modern theory
suggests that Investors
financial decision-
making are not driven
by due considerations.
The decisions are taken
by them are also often
inconsistent. Put in
another way, human
decisions are subject to

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several cognitive
illusions. These are
grouped into two and
have been depicted in
figure 1.
The decision makers act rationally while deciding on the base of traditional decision
theory. Therefore, as compare modern theory advice that decision of financial investors are
not ambitious by due thoughts. They occupy the choices are also frequently unpredictable.
Human verdicts are a focus to many reasoning impressions. In heuristic verdict process, the
conclusion procedure by which the depositor’s discovery belongings out for themselves,
typically by experimental and mistake, principal to the growth of instructions of the scan. In
other arguments, it mentions to guidelines of thumb which persons use to complete choices in
composite, uncertain environments. The authenticity, the depositor’s choice creation
technique is not severely balanced one. Supposed the depositors have composed the
applicable material and empirically appraised, in which the objective and demonstrative
factors are involved. It is precisely problematic to discrete. (Stanovich, West & Toplak,
2013).
In Prospect theory that is established by Kahneman and Tversky, the additional
collections of delusions which might influence the choice procedure are gathered in prospect
theory. He debated numerous states of attention which might inspiration an investor’s
conclusion construction process that are loss and regret aversion, self-control, and mental
accounting.

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Investment Strategies for Long-Term Optimal Growth
In recent years, behavioural investment is pleasant an essential part of conclusion-
making procedure since it profoundly impacts the depositor’s presentation. Keeping in mind
about behavioural finance that would assist the depositor to choice a better speculation tool,
and they can evade reiterating the expensive mistake in upcoming time. They can recover
their presentation by knowing their prejudices and errors of a decision. The investor’s
decision is also based on their presentation. The chief subject of reviewing behavioural
investment is in what way to minimalize or eradicate the emotional prejudices in speculation
verdicts of the venture capitalist. After a comprehensive study of the prose on behavioural
finance, it is supposed that it’s a perfect submission that could mark a definite venture
capitalist. Construction on fewer errors — several emotional and behavioural influences
stimulus venture capitalists in verdict creation. Numerous protections are desirable to
regulator psychological fault and emotional barricades whereas investing in shares as well as
mutual funds. A controlled interchange plan is obligatory to regulate these mental barricades
to all sorts of venture capitalist. (Kannadhasan et.al 2019).

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How Fairness And Ethics Can Be Applied To Investment Decisions.
Companies by way of a healthy moral individuality incline to uphold an excellent
gradation of investor consummation, definitely manipulating the economic outcomes of the
corporation, rendering to the Ethical Investment Research Service. On the other hand, the
absence of private and specialised ethics can be principal to undesirable fiscal outcomes, as
newly manifested by the breakdown of Wall Street firms. Hazardous loans and dubious
commercial practices put many banking and assurance firms in an unfair position.
Safeguarding moral behaviour at the corporation can assistance recover your business's
economic performance As persons develop additional conscious of businesses' influence on
the setting, they poverty to do commercial businesses that reproduce their standards. For
instance, if your manufacture procedures sources water pollution, it might be capable to ways
commercial in a cost-real way for the short term, but community estimation and weight to
recover your influence on the situation may decrease your auctions income in the extended
run. Evade these circumstances by temporary sensibly in the principal place.
Workforces desire to effort at corporations anywhere they will be preserved with self-
respect, deference and impartiality. When corporations create from top to toe standard for
ethical professional behaviour, personnel recognise that they will be pickled healthy.
Corporations with from head to foot altitudes of client consummation tend to produce an
advanced grade of client reliability, repeat commercial and additional marketplace part in the
extended run. Clienteles may weaken to contract with a commercial that reasons them to be
doubtful and frightened. Productions that donate to their public, preserve good relations with
administration establishments and other trades tend to be more positive in the extended run.
These businesses will not get unfocused by needless complaints and other doings that

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diminish from manufacturing superiority merchandises and facilities that permit optimistic
fiscal fallouts for the industry. (Williams & Ravenscroft, 2015).

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Reference:
Kannadhasan, Manoharan & Phil, M & , Trichy. (2019). ROLE OF BEHAVIOURAL
FINANCE IN INVESTMENT DECISIONS.
Williams, P. F., & Ravenscroft, S. P. (2015). Rethinking decision usefulness. Contemporary
Accounting Research, 32(2), 763-788.
Elbanna, S., Child, J., & Dayan, M. (2013). A model of antecedents and consequences of
intuition in strategic decision-making: evidence from Egypt. Long Range
Planning, 46(1-2), 149-176.
Stanovich, K. E., West, R. F., & Toplak, M. E. (2013). Myside bias, rational thinking, and
intelligence. Current Directions in Psychological Science, 22(4), 259-264.
De Bondt, W. F., Muradoglu, Y. G., Shefrin, H., & Staikouras, S. K. (2015). Behavioral
finance: Quo vadis?.
(2019). Citeseerx.ist.psu.edu. Retrieved 22 January 2019, from
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