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 the majority of analysts'
recommendations matched with market trends before the crisis, only about
half matched during the crisis and its recovery. People tended to follow
the general signals of the market, rather than to recommendations given
by analysts.
