The field of behavioral finance combines the elements of cognitive psychology and
financial economics. Broadly speaking, behavioral finance refers to how
psychology affects finance and more precisely how human behavior influences asset prices. The first paper, “Archeology of Behavioral Finance”, delves into the history of this discipline. The author looks at the history of behavioral finance by reviewing its origin from different disciplines of psychology, economics and finance. The author points out that though the financial origins of behavioral finance can be traced to early 1980s, its psychological origins date back to 1920s while the economic origins go back to 1950s. The paper thus helps in enhancing the historical roots of this discipline and takes us through the varied contributions from different disciplines towards the development of a new field of theory.
Efficient market hypotheses predict that stock price instantaneously reflect all the available information pertaining to the company. However, literature has detected various anomalies pertaining to the above. Debont and Thaler (1985) identified one such anomaly where selling the winners (stocks giving the highest returns over a period) and buying the losers (stocks giving the lowest returns over a period) resulted in abnormal returns. The second paper, “Survey of the Phenomenon of Overreaction and Underreaction on French Stock Market”, adopts the methodology proposed by De Bondt and Thaler (1985) and classifies stocks into winners and losers for the French stock market for the period 1974-2004. Contrary to the results of De Bondt and Thaler (1985), the author does not find the phenomenon of abnormal returns for the French market.
In line with reasoning in behavioral finance literature wherein the investor behavior is a result of more of psychological factors rather than purely rational ones, the third paper, “Does Personality Traits Influence the Choice of Investment?”, analyzes the influence of seven personality traits—emotional stability, extraversion, risk, return, agreeability, conscientiousness and reasoning—on the choice of investment pattern. The study was conducted in a brokerage firm having an investor population of 1,587. Using systematic random sampling, the authors identified a sample of 94 investors. The investors were made to fill a questionnaire which dealt with personality traits, investment method and demographic variables. The study shows a strong relationship between personality traits and method of investment. Among the various personality traits, emotional stability is the most important one.
The concept of coarse thinking is new to behavioral finance literature. The essential idea behind coarse thinking is that people put situation into categories and then apply the same model of inference to all situations within a category. The fourth paper, “Does Coarse Thinking Matter for Option Pricing? Evidence from an Experiment”, evaluates this idea in the context of option pricing. The experiment is based on Rockenbach (2004) and finds that coarse thinking affects the way a call option is priced.
The fifth paper, “Spot Return Volatility and Hedging with Futures Contract: Empirical Evidence from the Notional Commodity Futures Indices of India”, investigates the price volatility and hedging behavior of four notional futures indices which represent the relevant sectors like agriculture, energy, metal and an aggregate of agricultural, energy and metal commodities (COMDX) retrieved from Multi Commodity Exchange (MCX) of India. The study period dates from April 8, 2005 to August 31, 2010. The study estimates the hedge ratio through DVECH-GARCH, BEKK-GARCH and CCC-GARCH. Empirical evidence confirms that all the above models were able to reduce the exposure to spot market in comparison to the unhedged portfolio.
Automated Teller Machines (ATMs): The Changing Face of Banking in India
Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.
The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario
If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.
Indian Scenario
The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.
