THE RATIONALITY OF ACTORS IN THE FINANCIAL MARKETS

Ivan Lovre; Jelena Jotić

doi:10.5937/

Authors

Ivan Lovre Educons University, Faculty of Business Economy, Sremska Kamenica, Serbia Author
Jelena Jotić Educons University, Faculty of Business Economy, Sremska Kamenica, Serbia Author

DOI:

https://doi.org/10.5937/

Keywords:

Rationality, asymmetric information, adaptive rationality, financial markets, bounded rationality, irrationality, the efficient market hypothesis

Abstract

Traditional financial theory is based on the hypothesis of efficiency of financial markets. Fundament hypothesis on financial markets holds the concept of rational actors in the financial markets. Based on classical theory of rational man (homo economicus), which leads to a maximization of the utility based on the effective analysis of information, the traditional financial theory assuming rational actors in financial markets, abstracting asymmetric information, emotional and psychological factors of actors. In this paper we analyze the term rationality and its role in economic theory. The second part deals with (i) rationality of actors in financial markets and decision-making of market participants.

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