Master's Thesis from the year 2009 in the subject Business economics -
Business Management, Corporate Governance, grade: 1,2, University of St
Andrews, language: English, abstract: In the last decades many financial
crises have emerged, like the stock crash of 1987, the Asian crisis in
1997 and the global financial crisis that started in 2008. Although
those crises occurred for different reasons, they all proved financial
markets to be inefficient. Not all traders think rationally. Behavioural
patterns cause irrationality amongst traders. Even after decades of
research in this field, financial crises like the latest one in 2008
still develop out of a combination of different behavioural patterns
like herding. As a consequence those patterns deserve an in-depth
analysis that is conducted by the author in this work. In order to find
out to what extent behavioural finance influences the decision -making
process of traders and investors the seven most relevant behavioural
patterns have been identified and analysed through qualitative research
in form of primary research. The informal interview with the
sophisticated trader Thomas Vittner serves as empirical evidence for the
significance of the determined behavioural patterns. To find out,
whether public investors and traders showed a herding behaviour towards
analysts' stock recommendations in the financial crisis and its
recovery, quantitative research has been made by conducting an
experiment. Stocks performances in relation to analysts' recommendations
were analysed and evaluated. The author's selected behavioural patterns
are influencing traders' and investors' decision-making processes to a
large extent as their majority trades irrationally. The herding
behaviour to follow analysts' stock recommendations only holds partially
in the crisis and in the recovery phase. The results show that whereas
100% of analysts' recommendations matched with market trends before the
crisis, only 50% matched during the crisis and its
