How often have you come across people you know who have lost money in the stock market because they couldn’t guess where the market would go next moment or who made money because they knew where the market was headed next? Even the best market analysts can’t predict with absolute precision how the market will move the very next moment because financial markets are driven by sentiments and market sentiments are driven by market news.
An investor today has easy access to market news that may be factually correct or could be a rumour or mere speculation. While investment decisions based on factually correct news may yield positive results, investment decisions based on rumours or speculations can cause loss to investors.
According to Behavioural Finance Theory, investors are irrational by nature i.e
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