Behavioral finance - implications for investors

Degree thesis deals with behavioral finance with a focus on behavior and psychology of an individual investor. The first part is devoted to the prospect theory that is a descriptive model of behavior of economic agents under the conditions of uncertainty and stands in a stark contrast with the traditional normative expected utility theory. The second part is devoted to the group of behavioral biases that are distortions of human thinking and judgment documented by cognitive psychology. These biases are difficult to eliminate and lead to a biased perception, inaccurate judgments and illogical interpretations. The third and final part is devoted to a questionnaire survey whose goal was to find out whether financial market participants behave according to the axioms of the expected utility theory or whether they systemically deviate from the axioms of this normative theory. The second goal of the survey was to confirm or disprove inferences of academic studies about existence of behavioral biases