We have discussed at length the implied volatility and its relationships with realized volatility, volatility skew, dividend yield, and correlations. Moreover, it is interesting to examine implied volatility from a behavioural finance perspective. Reference studied the relationship between various countries’ implied volatilities and their cultural characteristics. Specifically, it utilized …

Retail investors are individual, non-professional investors who buy and sell securities, such as stocks, options, and mutual funds, for their personal accounts rather than for an organization or institution. Unlike institutional investors, who manage large sums of money on behalf of clients or large entities, retail investors typically trade in …

In the world of investing and trading, success often hinges on making sound decisions based on accurate assessments of one’s abilities and the market’s dynamics. However, the human mind is susceptible to biases that can cloud judgment and lead to suboptimal outcomes. One such cognitive bias is the Dunning-Kruger effect, …

Anchoring and Adjustment bias, a cognitive phenomenon deeply ingrained in human decision-making, exerts a profound influence on how individuals assess probabilities and make judgments. This blog post embarks on an exploration of Anchoring and Adjustment bias, delving into its mechanism, impact on financial decisions, and the critical concept of the …

The human mind is an intricate landscape of thoughts, perceptions, and judgments. However, this mental terrain is not always as objective as we would like to believe. Cognitive biases, inherent patterns of thinking, can skew our judgment and decision-making processes, leading us to draw conclusions that might not be entirely …

Immanuel Kant, an influential 18th-century philosopher, left an indelible mark on the world of moral philosophy with his groundbreaking ideas on ethics. Kant’s ethical framework, known as Kantian Ethics, emphasizes the significance of moral duty, universal principles, and the intrinsic value of human beings. In this blog post, we will …

The friendship paradox is a phenomenon in social network analysis that states that, on average, individuals tend to have fewer friends than their friends have. This paradox arises from the inherent structure of social networks, where popular individuals with a large number of friends are more likely to be included …

In the world of decision-making, our minds often grapple with cognitive biases that can cloud our judgment. One such bias, known as the “sunk cost fallacy,” has the potential to influence our choices and hinder our progress. In this blog post, we delve into the depths of the sunk cost …

The Fractal Market Hypothesis (FMH) is a theory that suggests that financial markets behave in the same way as natural phenomena and are subject to the same physical laws as found in nature. It suggests that financial markets are composed of similar patterns which repeat over and over again at …

Behavioural finance is the study of how financial behaviour affects economic decisions and market outcomes, and how those decisions and outcomes are affected by psychological, social, and cultural factors. It is a relatively new field that combines elements of economics, psychology, and sociology. Behavioural finance research has shown that people …