“Pain from a loss is three times the pleasure from profit of the same quantum and nature”
This was one of the interesting things that the participants of IIM Indore learnt during an interactive session organized on campus by Equit-I, the Finance & Investments Club of the Indian Institute of Management Indore. The session was on behavioral finance entitled “Behavioral Finance – Demystifying the Stock Market”.
The details of the seminar are as follows:
Date & Time: 02nd October 2005, 1030 ~ 1300hrs and 1430~1630hrs
Venue: Seminar Hall, IIM Indore
Speaker: Mr. Parag Parikh, Member of the Bombay Stock Exchange
About Behavioral Finance
Behavioral finance is the study of the influence of psychology on the behavior of financial practitioners and its subsequent effect on the markets. It attempts to better understand and explain how emotions and cognitive errors influence investors and the decision-making process. Behavioral financing is believed by many as an effective tool to explain the efficiency of financial markets, stock market anomalies, market bubbles, and crashes.
About the seminar
The seminar was divided into three different and interactive sessions with each session building on the previous sessions and further clearing the clouds from over the ever-so-inscrutable stock markets.
Session I
The seminar began with the first session as an introduction to the stock exchanges and behavioral finance which threw light on a variety of topics ranging from the differences between investments and speculations, to new theories like prospect theory, decision paralysis and the endowment effect. All these theories are the reasons why people get trapped by the vagaries of the stock market.
Session II
The second session further built on the previous session to further explain the symptoms and solutions of the problems like loss aversion, sunk cost panacea, decision analysis and endowment. Most people’s ears pricked up at the mention of a few tips and plans of action for investing in stocks. The speaker also had the audience in splits of laughter at different points during the session. One such occasion – “Analysis does not work in the market, but the analysts’ job is always secure!”
Session III
The last session, began after a lunch break, where Mr. Parikh went deep into the concepts discussed in the previous two sessions to explain the reasons for the stock market bubbles and bursts. Different myths about the markets were cleared, and new ways of thinking about investments were instilled in participants.
Profile of the speaker
Mr Parag Parikh is one of the pioneers of Behavioral Finance in India. He is a member of Bombay Stock Exchange since 1983 and his firm, Parag Parikh Financial Advisory Services Ltd. (PPFAS), offers a variety of investment services like wealth management, portfolio management, mutual fund advisory, institutional broking and retail broking. Equity research, investment-based analysis and behavioral finance concepts form the core of the business model of PPFAS. He holds a masters degree in commerce & economics from University of Mumbai. He completed a two-year “Owner President Management Program” at the Harvard Business School. He also attended a course on Investment Decisions and Behavioral Finance conducted by the Harvard Business School. He is also a Certified Financial Planner. For a detailed profile visit the following link:
http://www.ppfas.com/NEWSITE/AboutUs/People/paragparikh/paragparikh.htm