For many years, economical researches have been enriched by a psychological dimension, thanks to the work that has been done by many researchers, such as professors Werner de Bondt, Richard Thaler<\/strong> or Daniel Kahneman and Vernon Smith<\/strong>, rewarded by the Nobel Prize in Economics in 2002.<\/p>\n When analysing both individual and and collective behaviour towards stock exchange values, the behavioural approach explains phenomenons that are struggled to be defined by efficient markets theories. Over-performance of shares against bonds and other kinds of assets classes, can be justified by inherent rights when owning a company. Behavioural finance provides useful insights toward those risk premiums changes<\/strong>. This new approach of finance revolutionises both analysis methods and portfolio management. It may be impossible to foresee a price in the long run, but it is possible to adapt in time to the environment and benefit from financial trends generated by psychology.<\/p>\n How can we make an optimum use of behavioural finance analysis?<\/p>\n How can we distinguish negative trends from more favourable ones?<\/p>\n How can we reach a greater appreciation of risks and opportunities?<\/p>\n
\nResearchers gathered evidence of the individual’s irrationality and pointed out that this irrationality can explain observed markets deficiencies.<\/p>\n
\nThese ownership rights enable to take part in wealth creation, while foreign funds compensation is generaly fixed and time-limited.
\nHowever, shares give rise to risk premiums, despite a historically established over-performance against bonds, for instance.
\nThose risk premiums vary over economical and financial cycles, but never disappear.<\/p>\n
\nThis equity structural risk premium is explained by three combined factors:<\/p>\n\n
Behavioural finance or how to adapt in time<\/h3>\n