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Theoretical principles of behavioral valuation

Vol. 26, Iss. 1, JANUARY 2020

Received: 28 November 2019

Received in revised form: 27 December 2019

Accepted: 15 January 2020

Available online: 30 January 2020

Subject Heading: THEORY OF FINANCE

JEL Classification: C9, C92, D81, D90, G02

Pages: 20–35

https://doi.org/10.24891/fc.26.1.20

Bogatyrev S.Yu. Financial University under Government of Russian Federation, Moscow, Russian Federation
sbogatyrev@fa.ru

https://orcid.org/0000-0002-6080-5869

Subject The study examines properties of market actors that influence the valuation of assets, behavioral valuation processes, functions of constituents of the valuation practice, behavioral types of market actors, mutual impact of valuation parties in the financial market.
Objectives The study lays the basis for refining the classic framework for behavioral valuation on the basis of behavioral factors and irrational behavior of market actors and investors, disclosing the content of key constituents of the behavioral pricing theory.
Methods The article relies upon the analysis and generalization.
Results The article presents my own interpretation of the behavioral pricing theory. I overview how key principles of the above theory are applied nowadays. The theory of behavioral pricing for financial assets is construed as the basis for improving the classic framework of valuation. I show how valuation tools are used through behavioral factors, concerning the irrational behavior of market actors and investors. The article unveils the content of key constituents of the behavioral pricing theory.
Conclusions and Relevance Proposed by H. Shefrin and M. Statman, the behavioral view of asset valuation mirrors the Capital Asset Pricing Model. As the CAMP underlies traditional finance, behavioral finance stems from the discount rate based on the behavioral theory of asset valuation. I have discovered a group of investors which use the model for appraisal. The behavioral view of asset valuation was found to have useful characteristics and those ones reflecting predilections and behavioral aspects. The findings can be used for purposes of valuation, corporate finance, taxation, stock markets, especially during the instability and crisis, change in the market paradigm, market shifts, fluctuations of earnings and volatility of financial instruments.

Keywords: cost, valuation, behavioral finance, behavioral assessment, behavioral discount rate

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