Проводимо набір статей до публікації у науковому фаховому журналі
"Зовнішня торгівля: економіка, фінанси, право" з економічних та юридичних наук 

FREE FULL TEXT (PDF) 

UDC 339.727.2   DOI: https://doi.org/10.31617/zt.knute.2019(107)08
DZIUBA Pavlo,

 
E-mail: Ця електронна адреса захищена від спам-ботів. вам потрібно увімкнути JavaScript, щоб побачити її.
ORCID: 0000-0003-2932-0908
  Ph.D. (economics), Doctor of Economics, Associate Professor
of the Department of International Finance,
Institute of International Relations,
Taras Shevchenko National University of Kyiv
36/1, Yuriy Illienko str., Kyiv, 04119, Ukraine

BEHAVIORISM: EVOLUTION AND PLACE
IN INTERNATIONAL PORTFOLIO INVESTING THEORY
 

Background. The existing theory of international portfolio has the complicated gnoceological structure. It is developing on the basis of two existing paradigms and demonstrating more and more interdisciplinary features. Traditional approaches to international portfolio investing rest upon rational behavior of investing individuals whereas this assumption is often not valid in real life. Behavioral theories focus on specific behavioral deviations and biases of investment decisions and can boast frequent empirical testing.
The aim of the article is to determine the place of behavioral portfolio theory in the modern knowledge system of international portfolio investing, to identify the main directions of its relationship with other components of existing knowledge based on the study of its basic features and shortcomings.
Materials and methods. The study grounds on generally accepted scientific methods of research such as analysis and synthesis, abstraction, historical method and systemic approach as well as on specific methods such as logical and graphical modelling etc. The literature and material used include scientific publications and monographs of leading scientists in the field of financial theory, international portfolio investing and behaviorism.
Results. The emergence of behavioral portfolio theory was preceded by theories of more general direction. The prospect theory (1979) contradicts the utility approach. It suggests another method of risk-acceptance decision that is based on such behavioral effects as eliminating and certainty. The SP/A (1987) theory operates the following important people feelings such as security, potential and aspiration. The behavioral portfolio theory was formulated in 2000 and is based on the idea of multiple mental accounting. T. Howard theory of behavioral portfolio management (2014) is of scientific importance. It implies that the main factor of changes in market prices is represented by the emotions of crowds that are not able or do not want to release the brakes of their emotions. Behavioral investors should instead be guided by fundamental characteristics of securities and can achieve success via investing in the direction opposite to the crowds.
Conclusion. Behavioral theory of international portfolio investing is extremely significant, positive and widely spread though it cannot be identified as a paradigm in gnoceological understanding of portfolio investing. Behavioral theories do not explain the decisions of international investors - they only ground on methodology of existing portfolio and value investing paradigms. However, behavioral theories are especially relevant for international portfolio investing since this process includes investors of different countries, cultures, mentality, outlooks, traditions etc. and imply cross-cultural environment.
 
Keywords: behavioral theory, international portfolio investing, home bias, prospect theory, theory of behavioral portfolio management.

 REFERENCES 

  1. Markowitz, H. M. (1952). Portfolio Selection. The Journal of Finance. (Vol. 7), 1, 77-91. DOI: https://doi.org/10.1111/j.1540-6261.1952.tb01525.x, https://doi.org/10.2307/2975974 [in English].
  2. Markowitz, H. M. (1959). Portfolio Selection: Efficient Diversification of Investments. New York: John Wiley & Sons, Inc.; London: Chapman & Hall, Ltd.; Cowles Foundation for Research in Economics at Yale University [in English].
  3. Roy, A. D. (1952). Safety First and the Holding of Assets. Econometrica. (Vol. 20), 3, 431-449. DOI: https://doi.org/10.2307/1907413 [in English].
  4. Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance. (Vol. 19), 3, 425-442. DOI: https://doi.org/10.1111/j.1540-6261.1964.tb02865.x, https://doi.org/10.2307/2977928 [in English].
  5. Sharpe, W. F. (2007). Expected Utility Asset Allocation. Financial Analysts Journal. (Vol. 63), 5, 18-30. DOI: https://doi.org/10.2469/faj.v63.n5.4837 [in English].
  6. Merton, R. C. (1972). An Analytic Derivation of the Efficient Portfolio Frontier / Robert C. Merton. The Journal of Financial and Quantitative Analysis. (Vol. 7), 4, 1851-1872. DOI: https://doi.org/10.2307/2329621 [in English].
  7. Solnik, B. H. (1974). Why Not Diversify Internationally Rather than Domestically? Financial Analysts Journal. (Vol. 30), 4, 48-54. DOI: https://doi.org/10.2469/faj.v30.n4.48 [in English].
  8. Longin, F., & Solnik, B. (2001). Extreme Correlation of International Equity Markets. The Journal of Finance. (Vol. 56), 2, 649-676. DOI: https://doi.org/10.1111/0022-1082.00340 [in English].
  9. Rom, B. A., & Ferguson, K. W. (1993). Post-Modern Portfolio Theory Comes of Age. The Journal of Investing. (Vol. 2), 4, 27-33. DOI: https://doi.org/10.3905/joi.2.4.27 [in English].
  10. Chen, J. M. (2016). Postmodern Portfolio Theory: Navigating Abnormal Markets and Investor Behavior (Quantitative Perspectives on Behavioral Economics and Finance). Palgrave Macmillan [in English].
  11. Todoni, M. (2015). A Post-Modern Portfolio Management Approach on CEE Markets. Procedia Economics and Finance. (Vol. 32), (pp. 1362-1376). DOI: https://doi.org/10.1016/S2212-5671(15)01513-0 [in English].
  12. Eun, C. S., & Resnick, B. G. (1994). International Diversification of Investment Portfolios: U.S. and Japanese Perspectives. Management Science. (Vol. 40), 1, 140-161. DOI: https://doi.org/10.1287/mnsc.40.1.140 [in English].
  13. McDowell, S. (2017). The Benefits of International Diversification: Re-examining the Effect of Market Allocation Constraints. The North American Journal of Economics and Finance. (Vol. 41), (pp. 190-203). DOI: https://doi.org/10.1016/j.najef.2017.04.005 [in English].
  14. Fletcher, J. (2018). An Empirical Examination of the Diversification Benefits of U.K. International Equity Closed-End Funds. International Review of Financial Analysis. (Vol. 55), (pp. 23-34). DOI: https://doi.org/10.1016/j.irfa.2017.10.010 [in English].
  15. Graham, B., & Dodd, D. L. (1934). Security Analysis. New York, London: Whittlesey House, McGraw-Hill Book Company, Inc. [in English].
  16. Tinbergen, J. (1939). The Dynamics of Share-Price Formation. The Review of Economic Statistics. (Vol. 21), 4, 153-160. DOI: https://doi.org/10.2307/1926601 [in English].
  17. Fama, E. F., & French, K. R. (2012). Size, Value, and Momentum in International Stock Returns. Journal of Financial Economics. (Vol. 105), 3, 457-472. DOI: https://doi.org/10.1016/j.jfineco.2012.05.011 [in English].
  18. Fama, E. F., & French, K. R. (2015). A Five-Factor Asset Pricing Model. Journal of Financial Economics. (Vol. 116), 1, 1-22. DOI: https://doi.org/10.1016/j.jfineco.2014.10.010 [in English].
  19. Fama, E. F., & French, K. R. (1993). Common Risk Factors in the Returns on Stocks and Bonds. Journal of Financial Economics. (Vol. 33), 1, 3-56. DOI: https://doi.org/10.1016/0304-405X(93)90023-5 [in English].
  20. Fama, E. F., & French, K. R. (2017). International Tests of a Five-Factor Asset Pricing Model. The Journal of Financial Economics. (Vol. 123), 3, 441-463. DOI: https://doi.org/10.1016/j.jfineco.2016.11.004[in English].
  21. Fama, E. F., & French, K. R. (1998). Value versus Growth: The International Evidence. The Journal of Finance. (Vol. 53), 6, 1975-1999. DOI: https://doi.org/10.1111/0022-1082.00080 [in English].
  22. Hanauer, M. X., & Linhart, M. (2015). Size, Value, and Momentum in Emerging Market Stock Returns: Integrated or Segmented Pricing. Asia-Pacific Journal of Financial Studies. (Vol. 44), 2, 175-214. DOI: https://doi.org/10.1111/ajfs.12086 [in English].
  23. Cakici, N., Fabozzi, F. J., & Tan, S. (2013). Size, Value, and Momentum in Emerging Market Stock Returns. Emerging Markets Review. (Vol. 16), 3, 46-65. DOI: https://doi.org/10.1016/j.ememar.2013.03.001 [in English].
  24. Asness, C., Moskowitz, T., & Pedersen, L. (2013). Value and Momentum Everywhere. The Journal of Finance. (Vol. 68), 3, 929-985. DOI: https://doi.org/10.1111/jofi.12021 [in English].
  25. Shefrin, H., & Statman, M. (2000). Behavioral Portfolio Theory. The Journal of Financial and Quantitative Analysis. (Vol. 35), 2, 127-151. DOI: https://doi.org/10.2307/2676187 [in English].
  26. Howard, C. T. (2014). Behavioral Portfolio Management. C. Thomas Howard. Investments & Wealth Monitor. March-April. (pp. 44-51) [in English].
  27. Howard, C. T. (2014). Behavioral Portfolio Management: How Successful Investors Master Their Emotions and Build Superior Portfolios. Harriman House Ltd [in English].
  28. Bi, J., Jin H., & Meng, Q. (2018). Behavioral Mean-Variance Portfolio Selection. European Journal of Operational Research. (Vol. 271), 2, 644-663. DOI: https://doi.org/10.1016/j.ejor.2018.05.065 [in English].
  29. Lou, Y. (2019). On the Investment Direction of a Behavioral Portfolio Choice Model. Operations Research Letters. (Vol. 47), 4, 270-273. DOI: https://doi.org/10.1016/j.orl.2019.03.018 [in English].
  30. Oehler, A., Wendt, S., & Horn, M. (2017). Are Investors Really Home-Biased When Investing at Home? Research in International Business and Finance. (Vol. 40), 3, 52-60. DOI: https://doi.org/10.1016/j.ribaf.2016.12.003 [in English].
  31. Mukherjee, R., Paul, S., & Shankar, S. (2018). Equity Home Bias – A Global Perspective from the Shrunk Frontier. Economic Analysis and Policy. (Vol. 57), 3, 9-22. DOI: https://doi.org/10.1016/j.eap.2017.10.003 [in English].
  32. Geranio, M., & Lazzari, V. (2019). Stress Testing the Equity Home Bias: A Turnover Analysis of Eurozone Markets. Journal of International Money and Finance. (Vol. 97), 3, 70-85. DOI: https://doi.org/10.1016/j.jimonfin.2019.06.002 [in English].
  33. Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica. (Vol. 47), 2, 263-292. DOI: https://doi.org/10.2307/1914185 [in English].
  34. Lopes, L. L. (1987). Between Hope and Fear: The Psychology of Risk. Advances in Experimental Social Psychology. (Vol. 20), 2, 255-295. DOI: https://doi.org/10.1016/S0065-2601(08)60416-5 [in English].
  35. Pfiffelmann, M., Roger, T., & Bourachnikova, O. (2016). When Behavioral Portfolio Theory Meets Markowitz Theory. Economic Modelling. (Vol. 53), 3, 419-435. DOI: https://doi.org/10.1016/j.econmod.2015.10.041 [in English].
  36. Best, M. J., & Grauer, R. R. (2016). Prospect Theory and Portfolio Selection. Journal of Behavioral and Experimental Finance. (Vol. 11), (pp. 13-17). DOI: https://doi.org/10.1016/j.jbef.2016.05.002 [in English].
  37. Thaler, R. H., & Johnson, E. J. (1990). Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice. Management Science. (Vol. 36), 6, 643-660. DOI: https://doi.org/10.1287/mnsc.36.6.643 [in English].
  38. Daly, K., & Vo, X. V. (2013). The Determinants of Home Bias Puzzle in Equity Portfolio Investment in Australia. International Review of Financial Analysis. (Vol. 27), (pp. 34-42). DOI: https://doi.org/10.1016/j.irfa.2012.05.005 [in English].
  39. Mishra, A. V. (2015). Measures of Equity Home Bias Puzzle. Journal of Empirical Finance. (Vol. 34), (pp. 293-312). DOI: https://doi.org/10.1016/j.jempfin.2015.08.001 [in English].
  40. Mukherjee, R., Paul, S., & Shankar, S. (2018). Equity Home Bias – A Global Perspective from the Shrunk Frontier. Economic Analysis and Policy. (Vol. 57), (pp. 9-21). DOI: https://doi.org/10.1016/j.eap.2017.10.003 [in English].
  41. Jaye, N. (2014). The Next Paradigm. CFA Institute Magazine. (Vol. 25), 5, 28-31. DOI: https://doi.org/10.2469/cfm.v25.n5.10 [in English].