Running Head: CASE 4-3 BEHAVIORAL FINANCE
Discussion Board 2
Case 4-3 Behavioral Finance
Ashley Oldham
ACCT 632, Liberty University
1
Biblical Application
CASE 4-3: BEHAVIORAL FINANCE2
Case 4-3 Scenario
Behavioral finance emerged during a time when the EMH theory was acquiring some
negative attention since the EMH theory did not cover all situations. The identification and
presence of anomalies was used to excuse the results that could otherwise point toward needing a
new theory. Below the four anomalies will be explained, a basic concept of behavioral finance
will be presented, and how basic cognitive biases are at work.
Four Types of Anomalies
An anomaly is defined as any situation and result that deviates from the accepted or
known theory called Efficient Market Hypothesis (EMH). There are four main types of
anomalies: calendar, value (fundamental), technical, and other (Schroeder,
Basic Concept of Behavioral Finance
When these deviations occur, these were considered “anomalies” which could have also
been termed an oddity, peculiarity, aberration, quirk, or rarity. The theorist of EMH believe that it
is the standard to the point where they are willing to make exceptions to a theory that should
include and guide all.
Cognitive Biases
CASE 4-3: BEHAVIORAL FINANCE3
References
Schroeder, R.G., Clark, M.W., & Cathey, J.M. (2016). Financial accounting theory and analysis:
text and cases (12th ed.). Hoboken, NJ: John Wiley & Sons, Inc.
