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07:01:48 am

Real-world Applications Of Behavioral Finance

But that does not mean future Egyptian governments will abandon the idea. In the past year, governments and companies in the Gulf and Turkey have stepped up sukuk issues, tapping large pools of Islamic funds whose demand for sharia-compliant instruments has exceeded supply. To help replenish its foreign exchange reserves and bridge its huge state budget deficit, Egypt will remain under strong pressure to follow suit - especially since the Gulf has become increasingly important to the Egyptian economy. Saudi Arabia, the United Arab Emirates and Kuwait have become Egypt's main financial backers since Mursi was deposed, pledging $12 billion in aid. Any revival of foreign investment in Egypt is expected to depend heavily on the Gulf. Finance Minister Ahmed Galal told reporters last month that the interim government had no problems in principle with using sukuk, but would not make them its principal instrument. While post-Mursi governments are likely to promote Islamic finance less aggressively than the Muslim Brotherhood, they may regulate it more efficiently - most types of economic policy-making under Mursi were marred by political bickering and bureaucratic logjams.

Sentiment Analysis One tool fund managers use to capitalize on investor irrationality is market sentiment analysis. Instead of using quantitative methods of evaluating the market, companies such as MarketPsych and Lexalytics mine the news and social media to evaluate trends in the market. Fund managers can then use the information to help determine market attitudes towards certain companies and use this information to locate mispriced assets. Expert Analysis Katsuhiko Okada, Kwansei Gakuin University Institute of Business and Accounting and CEO of Magne-Max Capital Management, uses behavioral finance principles to make investment decisions: Our fund aims to capture Japanese Investor psychology through text-mining the media sentiment in the market. We obtain massive textual data from the news media as well as social media such as Message boards and Twitter. In order to decompose the Japanese text into to an analyzable format, we use technologies developed in the area of Informatics, specifically Natural Language Processing (NLP) area. We then create a dictionary of words defining sentiment.

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