Finances- Accounting INVESTORS PSYCHOLOGY AND THE HERD EFFECT ON THE FINANCIAL MARKETS

Abstract: Human psychology is the key to understanding the world and also to understanding investment. Go against the crowd, against the specialist advices in the papers and in the end, you will be one of the few winners. This is what the ”against the crowd ” supporters tell us. The market will always give you the chance to play your card differently, the problem is: can you go against every one of our instincts? Are you strong enough as to take decisions against every impulse that you get from your body and your mind? JEL classification: G11; F21 Key words: investment psychology, against the crowd, instinct, profitability, group behaviour 1.The impact of human emotions on investments Emotions become our enemies when we take decisions on the market and in business in general. On a bull market (growing) we tend to buy excessively, almost blindly and to hear only what we are interested in hearing, out of the information tha