Capital Market Anomalies: Explained by human´s irrationality

Bachelor Thesis from the year 2011 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 2,7, University of applied sciences, Duisburg, language: English, abstract: Why do small caps achieve higher risk-adjusted yields than large caps ? Why do stock prices increase or decrease upon an index entry respectively deletion ? Why does January records higher yields than the remaining months of the year ? These as well as other observed capital market anomalies respectively phenomena could insufficiently be explained by the classical capital market theory, which proceeds on the assumption, that all correspondent information are reflected in the stock prices, all negative effects are directly balanced on the market level and efficiency of arbitrage principle exists as well as all market participants are acting rational, i.e. optimizing their benefits in the sense of the homo oeconomicus. This motivated some economists and psychologists to research the influences on the formation of prices on the capital market while including behavioural scientific findings. Hence in 1980s Behavioural Finance has been developed, which challenges the homo oeconomicus and came to the conclusion, that humans are not only acting rational, but that they are influenced by emotions, knowledge as well as experiences, i.e. are irrational. Thus this new scientific behavioural oriented theory, which is today a separate branch of research, contradicts the classical capital market theory and supplies explanations for the observed phenomena on the capital market.[...]