Examine the Impact of Multinational Corporations Setting up in Developing Countries Essay

There has been a very controversial debate over years now about the impact of multinational corporations setting up in developing countries, which have many supporters as well as opponents. Surely there is not only one way to look at this more and more common phenomenon that affects the host countries in many both positive and negative ways that are discussed in this paper. The term multinational corporations (MNCs) is used â€Å"to identify firms that have extensive involvement in international business and engage in foreign direct investment (FDI). MNCs own and control value-adding activities in more than one country that are usually coordinated from central headquarters† (Griffin and Pustay, 2005). The investment of MNCs in the developing countries has greatly increased since the mid-1980s, because of globalization as they looked for new resources and larger markets (Greer and Singh, 2000). Presently, there are over 35,000 multinational corporations with more than 15,000 foreign subsidiaries, which is around one-third of the whole world production. Their value is estimated to be more than $1.5 trillion, one-third of which in the developing countries (GhanaWeb, 2012). The developing countries with most multinational investment are those with highest growth potential like Asian countries: China, Malaysia, Thailand, Singapore, and Latin American ones: Mexico, Argentina and Brazil. The African countries get less than 4% while the poorest 50 countries worldwide receive less than 2%. Over a half of business activities of MNCs deal with manufacturing and services and one-third with oil and gas (GhanaWeb, 2012). According to the report by the Institute for Policy Studies out of 100 lar gest world economies, based on corporate sales and country GDPs, 49 of those economies are countries while the other 51 are multinational corporations. Also, it is stated that the sales of the Top 200 corporations are equal to the 27.5 percent of world economic activity (Institute for Policy Studies, 2012). These numbers show how powerful MNCs are and how  important they are to the world economy, but what is their impact on the developing countries? On the one hand, multinational corporations setting up in developing countries have a very positive effect on their host countries. First of all they provide direct employment to local people and transfer of skills through education and experience. They also affect the indirect employment through paying rent for land or buildings and cooperating with local suppliers, who now have more demand and must deliver higher quality products. As residents have more chances for income they can purchase more and improve their standards of living, while there is generally greater selection and availability of goods and services. The standard of living of local people in some developing countries like Bermuda, the Bahamas, South Korea, Singapore, Hong Kong, and Taiwan has improved largely after the investment of multinational corporations there (Action Institute, 2012). In addition, attracting foreign investment in the developing countries results in economic growth and higher national income. Such countries are usually better off with higher development rates, higher exports, lower imports and additional tax revenues coming from the multinational corporations. For instance, when Toyota started working in Georgetown, Kentucky it paid $1.5mln in property taxes, which was around one-fourth of the town’s municipal budget. By attracting foreign direct investment developing countries will also make substantial tax revenues that can be later on spent on health care, education and other domestic needs (Griffin and Pustay, 2005). In order to attract foreign direct investment local governments many times compete with each other to offer better conditions to multinational investors and lower the income taxes for their corporations. Yet they still get great amounts of money from the corporations that they would not get otherwise. Moreover, when moving into developing countries multinational corporations transfer technology and skill with them. There are also great improvements made to the local infrastructure to allow the effective operation of the corporations (Action Institute, 2012). That is a very important aspect for the developing countri es as it improves their development and brings them at least a bit closer to the developed countries. Developing countries get an update on technology that people get used to and learn to work on, while the whole local society benefits from improved infrastructure like better roads, telecommunications etc. On the  other hand, multinational corporations can have a very negative effect on the developing countries. They are a very strong direct competition to local firms that are forced to shut down and due to their political and economic power they have advantages given by the local governments over small, national or start-up businesses. An example of such additional advantages to multinational corporations over local firms include lower taxation, less strict laws and less bureaucracy in setting up and later on operating the business activities. This results in unfair competition, while shutting up local firms leads to unemployment and in some cases monopoly (Global Issues, 2012). Furthermore, due to their great size and wealth multinational corporations usually gain great economic and political power that can be misused. They usually have big influence on the local governments and are quite often associated with corporate corruption, bribery, lobbying or sponsoring politics campaigns during elections. As the corporations grow bigger they have a greater concentration of wealth, power and influence in the local area. The local authorities often face the threat of multinational corporations withdrawing the local market in case of stricter laws, higher taxation or other problems. In cases when multinational corporations really withdrew such markets, the whole process had a devastating effect on local economy strongly dependant on the foreign investment rates of unemployment went up and rates of economic growth went down at once (Adeyeye, 2012). Additionally, since multinational corporations can afford the best lawyers and accountants they are recognized for their large scale tax avoidance especially through mispricing transfers and false invoicing. In 2008 it was estimated that the developing world loses $160bn a year in tax revenue from only those two forms of tax avoidance (Global Issues, 2012). Not to mention the fact that local governments usually give corporations the privilege of lower taxation in order to attract the foreign investment. Unfortunately, the developing countries usually do not have the expertise, knowledge, wealth and power to address such issues. The multinational corporations are also known for their way of doing business: profit over people and their human rights. The reason why they decide to invest in host countries is to cut costs and maximise profits. If the cost of doing business was the same in home and host countries no company would decide to take such a great risk to expand overseas without any additional benefits. A great opportunity for  corporations is cutting costs in one of the most expensive factors of production: labour. Everyone has heard of cases of labour abuse, extremely low wages, child labour, poor working conditions and no health care in plants owned by multinational corporations in developing countries. In cases when local governments want to intervene and impose stricter laws on work safety, wages or even pollution controls they often have to deal with threats of market withdrawal and loss of foreign investment (Global Issues, 2012). Nevertheless, the wages paid to local workers seem low by western standards, but in local standards are acceptable and are much better than not having a job at all. Many multinational corporations like Nike have taken important steps to improve the working conditions of their employees in developing countries. Few years ago Nike was criticized for the poor working conditions and hard women and child labour in its plants in China, but the company w as not aware of these problems as it was subcontracting with Asian manufacturers. Nowadays the company works more closely with subcontractors on issues concerning employee rights and working conditions in its overseas plants (The World Bank Group, 2012). Last but not least, many opponents to the phenomenon of multinational corporations setting up in developing countries claim that the only reason they decide to invest in host countries is to gain access to their precious natural resources. These corporations exploit the non-renewable natural resources of developing countries like oil or gas for much less than their actual value. In exchange they negatively affect the local environment by polluting air, land and water through mining, auto, oil and chemical corporations. Then residents are left with no drinking water and diseases caused by heavily polluted environment like in China or India. However, small local firms also pollute the environment (on a smaller scale) and the issue needs stricter government regulations (The World Bank Group, 2012). Since these corpor ations do everything to keep their costs down and maximise their profits, they use non-environmentally friendly methods of production and non-renewable resources and get rid of production waste in a dangerous way. It is the government’s responsibility to make sure these corporations protect the environment through imposing regulations, controlling and making sure they are put in practice. To sum up, multinational corporations have both positive and negative impact on developing countries they are setting up in. They give employment to local people and improve their standards of living, bring economic growth, higher national income and tax revenues, not to mention the transfer of technology and skills. However, they are serious competition to local businesses, often violate human rights, practice tax avoidance, misuse their economic and political power, exploit the local natural resources and harm the environment. The developing countries have the most need for foreign direct investment from the multinational corporations in order to catch up with the developed countries in their economic development, but they are the most at risk of exploitation and have the least power to resist it. Multinational corporations can bring many benefits to local societies as a result of their business activities, but this is surely not their initial aim. The purpose of these giant firms is to make the biggest possible profits at the smallest cost. They do not invest in host countries for humanitarian reasons a nd they will not bother to put additional effort or spend additional money to improve certain issues on their own without having a gain in doing so. This is the role local governments and societies should take and strongly insist on. Especially the local authorities should keep power and control strongly, not let the corporations be excessively large and powerful or affect the local communities in a negative way. Multinational corporations can be engines of positive change in the developing countries, but the local authorities should always keep in mind the overall good of their people and land, not only in the short but also in the long run and set favourable agreements and strict regulations that will benefit and protect the residents and the environment. That is because if following all the demands of corporations, local communities have much more to lose than the investment; precious natural resources, residents’ health and welfare and clean environment once gone cannot b e returned. Bibliography Adeyeye, A. (2012). Corporate Social Responsibility of Multinational Corporations in Developing Countries: Perspectives on Anti-Corruption. Cambridge University Press. London, UK. Griffin, R. and Pustay, M. (2005). International Business. A Managerial Perspective. Prentice Hall, New York, USA. Greer, J. and Kavaljit, S. (2000). A Brief History of Transnational Corporations. Corpwatch. Global Policy Forum. Jones, G.& George, J. (2008). Contemporary Management. McGraw-Hill/Irwin. New York, USA. Online Articles Action Institute. Multinational Corporations in the Third World: Predators or Allies in Economic Development? http://www.acton.org/pub/religion-liberty/volume-2-number-5/multinational-corporations-third-world-predators-o. Accessed 2/05/2012. GhanaWeb. Multinational Corporations and the Developing World. http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=171863. Accessed 3/05/2012. Global Issues. The Rise of Corporations. http://www.globalissues.org/article/234/the-rise-of-corporations. Accessed 4/05/2012. Institute for Policy Studies. Top 200: The Rise of Corporate Global Power. http://www.ips-dc.org/reports/top_200_the_rise_of_corporate_global_power. Accessed 2/05/2012. The World Bank Group. Multinational Corporations in Developing Countries and Corporate Social Responsibility. http://info.worldbank.org/etools/bSPAN/presentationView.asp?EID=417&PID=827. Accessed 3/05/2012.

Potential hazards Essay

Doors are being left open is a big hazard because it opens a various amounts of hazards such as the children walking through the nursery alone without supervision. Having a doors open can also allow people to come into the nursery which jeopardizes the safeguarding of the nursery. The nursery overcomes this by having code locks on all entrances of the nursery as well as all of the internal doors. Hazard number two: sharp objects. In Nursery the children have a craft area and there are pots of scissors on a top a cupboard that the children can reach, this is a hazard because event thought they are safety scissors they are still sharp and can cause harm to the children. Another sharp objects that can be found around nursery can be the knifes at dinner time, they have to make sure that they are rounded and blunt in case the children dropped them on the way to their tables. Hazard number three: sockets. As the nursery is an old building the sockets and electric works are low down so if the plug sockets do not have a safety plug in the children run the risks of shoving objects in to the sockets and electrocuting themselves. The positioning of the sockets are positioned low to the floor to prevent a trip hazard. Hazard Number four: slip hazards. With the nursery providing drinks throughout the day and liquids there is a potential hazard of the children slipping and hurting themselves. To prevent this the nursery does regular checks of the toilet because the children wash their hands they drip their hands and they monitor the children when they have a drink. Hazard number five: hot food temperatures. In the nursery they operate a self-serve lunch service so when they give the children the food they have to make sure that the food is not hot enough for them to burn them if they drop the food as well as when the children eat the food that it is not to hot that they burn themselves when eating the foods. During food preparation the food has to be heated to a high temperature to kill off any bacteria that can cause disease. Hazard number six: registers.

Critical Evaluation Essay

â€Å"Now We Can Begin† an essay by Crystal Eastman is a very powerful essay. Eastman makes the point know in her essay that an honest and true feminist no matter where she stands in the movement she will see to the woman’s fight with strength and courage and how it matters in the future and as well as its difference in its approach for the workers fight for industrial freedom. Eastman state â€Å"In fighting for the right to vote most women have tried to be either non-committal or thoroughly respectable on every other subject. Now they can say what they are really after; and what they are after, in common with all the rest of the struggling world, is freedom† (Eastman). The women’s rights movement had many women who fought for women’s rights, some of these women included Susan B. Anthony, Elizabeth Cady Stanton and Lucretia Mott and many more. These women worked extremely hard as activist for women’s rights. The fight lasted for many years, but they day finally came and women got the right to vote and now they could begin. History.house.gov states â€Å" fortified by the constitutional victory of suffrage reformers in 1920, the handful of new women in Congress embarked on what would become a century-long odyssey to broaden women’s role in government, so that in Catt’s words, they might â€Å"score advantage to their ideals.† The profiles in this book about these pioneer women Members and their successors relate the story of that odyssey during the course of the 20th century and into the 21st century† (history.house.gov). During 1920 Eastman wrote an essay about this very issue. In Eastman’s vie w she is pointing out to her audience what women went thorough as a whole group doing that time frame. This essay was also an appeal to society now that women in the American society had the right to vote that they also be treated just the same as the men in American society that they were a part of. In 1848 there were two things that America was dealing with at the time and those two issues were women’s rights and slavery. During that same time Elizabeth Cady Stanton was head of the Women’s Rights Convention in New  York. It was with much time and effort put into many conferences that the amendment which gave the women the right to vote was written by Susan Anthony, but the amendment was not passed and made law until 1920. During this time is when Crystal Eastman started stating her views and ideas of what she would like to happen. Eastman was there first hand to see that women did not have any rights during her short life so the having the Eastman writing this article is a very valuable trustworthy source as an activist for women’s rights. Crystal Eastman wanted to see change this is obvious seeing how she helped found the International League for Peace and Freedom this group was previously named the Woman’s Peace Party Crystal Eastman served as pr esident of this organization. Eastman states how grateful she is that the law was passed that gave women the right to vote but, that is not all she expressed that she wanted more. East writes this essay playing on the emotions and logical thinking of her audience. Eastman states â€Å"Freedom of choice in occupation and individual economic independence for women: How shall we approach this next feminist objective? First, by breaking down all remaining barriers, actual as well as legal, which make it difficult for women to enter or succeed in the various professions, to go into and get on in business, to learn trades and practice them, to join trades unions† (Eastman). In this essay Eastman makes sure that is known that there is more to women that just staying at home and taking care of the house and caring for children. When reading this essay and the argument that Eastman portrays is a successful essay. Due to the hard work and efforts of Eastman and those before her such as Stanton and Motts the set and laid the foundation for success in the fight of the women’s rights movement gaining equal fair opportunities for women. Works Cited â€Å"Now We Can Begin.† Women’s History – Comprehensive Resources – Biographies, Quotes, Events. N.p., n.d. Web. 21 Sept. 2014. â€Å"The Women’s Rights Movement, 1848-1920 | US House of Representatives: History, Art & Archives.† US House of Representatives: History, Art & Archives. N.p., n.d. Web. 21 Sept. 2014.

4 Questions Essay Example | Topics and Well Written Essays - 500 words

4 Questions - Essay Example For instance, the introduction of diet soft drinks offering low amounts of sugar is indicative of a social trend whereby consumers have increasingly become health conscious. These elements are crucial for any business and hence should be taken into account and business policies should be adapted according to such changes in lifestyle of people to sustain their competitive positioning in the industry. The businesses on the other hand should also take into consideration the implications of their products and develop them accordingly. For instance the increasing trend of environment protection and global warming has led to manufacturing of environmental friendly products such as Toyota’s hybrid car – Prius. Political elements such as government legislations in favor or against a particular goods / service can greatly influence the manufacturing and marketing of that product causing severe damage to its profitability. These political elements are likely to have more significant impact on industries which are highly dependent on governmental aids such as budgets and subsidies. For instance, the Aerospace and Defense industries are highly influenced by defense budgets allocated by the government as well as the political relations between certain countries. This can affect the major players in the industry such as Boeing, EADS , Dassault Aviation etc. The advancement in technology brings about several changes in the marketing of products of a company. The various technological tools available offer different ways to approach the same needs and demands of the customers making the competition extremely fierce. Increased technological advancement also often leads to faster obsolescence of products. The demand for a particular technology is dictated by the markets and hence required to be adopted by companies providing such products in order to sustain their revenue flows. The sheer number of players available in the market would lead to customer switching and hence

Contract law, Doctrine of consideration Case Study

Contract law, Doctrine of consideration - Case Study Example Professor Patrick Atiyah1. Consideration can be defined as "An act of forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable." F. Pollock2. A redundant or free promise is hence, legally unenforceable. Such promises do not involve consideration and consequently, they are not regarded as contractual promises unless made as a formal contract by deed. In English Law a promise made under contract is unenforceable in the absence of consideration. Further, the legitimacy of a simple contract can be ensured only if there is consideration from the party accepting the offer. Increasingly, judges are being encouraged to find consideration in cases; this is so that contractual claims can be assessed on the basis of the real intention of the contracting parties to one and another, rather than a strict and narrow interpretation of case law. Consideration is only at issue in simple contracts, Courts often have to find consideration to be able to infer that a contract exists. In a Contract By Deed, consideration is unnecessary; as it is clear what is due form whom. In addition, where the traditional narrow view of consideration may lead to inconsiderate results, Courts may accept a request for applying the principle of equitable estoppel. Therefore, a contract which contains promises unsupported by consideration is void ab initio. Valid consideration has the following features: 1. Consideration must move from' the offeree to the offeror, that is, the person making the offer must be expecting something in return. 2. Consideration must be something of value, however trifling to the offeror, or something of detriment to the offeree. 3. Consideration must be sufficient in law, but need not be sensible in fact. An offer of sale of a Rolls Royce Car for 1 is valid consideration though not sensible. However, if this car is offered gratis, there is no consideration and the agreement is unenforceable. 4. Consideration must impose an obligation in the future; it is unusual and inadequate to base an offer on past consideration3.In the case Currie v Misa it was held that, "A valuable consideration, in the sense of law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other"4. Hence, reciprocity is essential to the doctrine of consideration, in other words, a promisee cannot enforce a promise unless he has

Short story Essay Example | Topics and Well Written Essays - 750 words - 4

Short story - Essay Example Normally, two spoons are enough for me. However, that day I needed more. It was like I felt that that one extra spoon would give me the confidence and courage for the grand adventure that was just about to begin. That morning I was going to ride my bike to the top of the highest mountain in the neighborhood. The steep twisted roads leading to the top were considered dangerous even for the more experienced riders than I was. The challenge seemed to be a tough one. However, I had been crazy about reaching that summit for almost a year, and I had to do it. Otherwise, my desire would not leave me alone. I finished my super energetic drink and headed for the front door. Although my courtyard was lit with the sunlight, it was still quite chilly outside. The whiff of fresh air against my face cheered me up as I moved towards the mountain. I was as excited as never before. After I crossed the railroads, my challenge was officially on. When the first corner was complete, I found that my vigor had gone somewhere. The feeling was like myriads of invisible needles were stuck into my legs. Sweat was streaming down my face. I could feel how it gets into my eyes. It was like someone stuck a finger straight into my eye socket. I stopped to remove my glasses just for a moment; then went on again. As I turned around the fifth corner, I realized how close to the top I was. My heart was jumping out of the chest. The sound of it was ringing in my head like a bell; I could practically hear it pumping blood throughout my exhausted body. The summit was very close. I was nearly there. However, I was starting to flag. My legs moved slower and slower. It was harder to press the pedals. I felt like I was underwater. Climbing up on the last hill, I saw a beautiful glade through the trees. Obviously, it was my final leap. At that moment, it was rather a mental challenge than a physical one. That was the point when I had to question myself how much I wanted to reach the top. I

Personal statement Essay Example | Topics and Well Written Essays - 1000 words - 1

Personal statement - Essay Example To be specific, my father is the president of a local bank in China. My father and mother have always been interested in their jobs, and they frequently used to discuss financial problems and solutions. In addition, when I was a high school student, I used to look through books beyond my textbooks. For instance, I used to read my parents’ books related to management and business law. Obviously, these books were useful to them as bank employees, and they were stimulating to me as a person developing an increasingly deeper interest in economics. Gradually, I came to realize that learning economics could help me to have a secure life in the future. My work experience and internship include some basic work in a local bank in China. For example, during last summer vacation, I worked as a teller. This helped me to have practical experience in dealing with customers. Moreover, this internship helped me to acquire the basic skills that are essential to a bank employee. Now, I realize that work experience and internship are most helpful for an individual who is aiming to be a bank employee. So, I gained the basic skills in customer care, especially the skill to deal with short-tempered customers. My core courses at City College have included macro-economics, micro-economics, Statistics, Calculus- Biology, Social Science and Business. These courses have helped to develop my interest in the major. For instance, all these courses, except Social Science, are related to the theoretical area of banking. On the other side, Social Science relates to the practical matter of customer relations. The course subjects like macro-economics, micro-economics, Statistics, Calculus at City College and major requirements at the University of California are same. Besides, I am particularly interested in macro-economics and micro-economics, especially the theories like Classical Economics and New Classical Economics and theory of Demand. The classes at City College sparked my curiosit y in the subject in part because macro-economics was familiar to me. Later, I discussed this matter with my parents and they encouraged me in my habit of reading books. The lecture classes at City College have also helped me to grasp new concepts and even to develop some ability to predict the ups and downs in the banking sector. Prompt #2 In China, one’s family is the most influential factor in one’s individual growth and development. As far as I am concerned, my family is clearly the most important motivation behind my personal growth. However, when I immigrated to the United States of America, I discovered the amalgamative power of American culture. For instance, it would seem that an individual who is so close to his or her family might face a number of problems on his own in a different culture. In America, however, I did not feel any difficulties because it is a multicultural society. Larry L Naylor opined that â€Å"In fact, many Americans believe that culture does come from their families where they learned their family traditions and their heritage† (1). I was aware of the fact that I needed to let myself be absorbed into the core of the American society. To be specific, personal qualities like receptiveness and open-mindedness can be helpful for an individual to accept a different culture. As an open minded individual, I was able to gain a number of friends at the College. Besides, the multicultural atmosphere of the College campus helped me to be open-minded and receptive towards others who are from

Discussion 4 Assignment Example | Topics and Well Written Essays - 250 words - 1

Discussion 4 - Assignment Example This also involves identifying gender’s role whose mainstream consideration is attributed to sexuality factors. The human sexual behavior is composed of diverse motivations, ranging from sexually-generated interests to behavioral classifications. For instance, the gender factor involves sexual drives and preferences, and the unique cultural interventions have explored advances in cultural range, which hence create substantial amount of sexual orientations (Johnson, 2004). The school of thought fostered by Suzanne LaFont (2003) illustrates that variations among sexual classes have diversely created sub category for minority sexual groups. Lack of moral obligations and the sheer interest for defining sexual orientations that provide a different biological taste has been incorporated into the human sexuality potentials. The rate and range of sexual preference has changed with time and this focus provider a critical reflection of gender connectedness between changing behaviors and changing societal values. The US interpretation of gender provides a conclusive approach or reproach to emerging sexual categories which are then incorporated into new social process (Zhou et al., 1995). The critical variation of sexual and gender factors including gays, transgender and intersex have been viewed as the new constituents of gender and the interpretation hence outweighs the traditional perception of gender. However, other cultures outside the U.S. underline the traditional classification of

Multinational Enterprise Essay Example | Topics and Well Written Essays - 2250 words

Multinational Enterprise - Essay Example The organisation is known for daily output of 2 million barrels of petrochemical products (Luong and Sierra, 2013). The discussion will analyse the base of Petrobras, Brazil, as an emerging market while evaluating different emerging market multinational. The study will illustrate the internationalization path of the company. It will also detail various business concept and internationalization theories to evaluate the internationalization strategies of Petrobras. Emerging-market multinationals (EMMs) are the enterprises which are based in an emerging market and have operations in other countries as well. Emerging markets are the countries which have demonstrated some traits of developed countries but cannot be referred as fully developed country (Subramaniam, et al., 2015). Emerging market consists of all the newly industrialized economies of Asia as well as other developing and emerging countries. Most of the EMMs are belong from the leading developing countries like China, Brazil, India and Russia (Accenture, 2008). There are mainly five types of emerging market multinationals such as full-fledged globalizers, regional players, global sources, global sellers and multi-regional niche players (Accenture, 2008). The full-fledged globalizers are the established and old EMMs that have already attained geographic span that is similar to the biggest Western multinationals. Regional players are those organisations which are planning to break out of their domestic market to attain greater scale. These organisations are only concentrating on the neighbouring market due to geographical proximity and cultural affinity. Global sources tend to source internationally while their main focus is the domestic market. Global sellers primarily manufacture in their home country but seek consumers from different geographical locations. The last type

Urban tourism in East end London, a case of Spitalfield Market Research Paper

Urban tourism in East end London, a case of Spitalfield Market - Research Paper Example The development of tourism destinations worldwide has been resulted because of the increase of competition in the tourism and hospitality sector. The efforts made by governments and organizations of the private sector for the support of the tourism industry worldwide are characterized by the following trend: innovation is promoted while emphasis is given on sites and activities that are likely to result not just to economic but also to social benefits.The value of urban tourism within the global market cannot be denied,not all urban tourism destinations manage to respond to the requirements of their role. Spitalfield Market has been initially established in order to cover the needs of the local community for a Street Market. Moreover, issues like sustainability have become an indispensable part of the policies developed in the particular sector. Current paper focuses on a particular sector of the tourism industry: the urban tourism. Reference is made to a well – known Spitalfi eld Market in East London. The potential role of this Market as an urban tourism destination is critically examined using existing literature but also an appropriately customized survey. The findings of the literature and the empirical research lead to common assumptions: Spitalfield Market has many elements that could justify its characterization as an urban tourism destination; however, it is clear that the specific Market does not fully meet the requirements of urban tourism destinations... The sites of cities, which can be chosen as urban tourism destinations are not standardized. In accordance with Law (1993) urban tourism is more related to entrepreneurial activities; this means that when having to choose among urban tourism destinations, the one which is related to specific business or industrial activity should be more aligned with the requirements of urban tourism destination (Law 1993 in Selby 2004, 11). In the form described above, urban tourism can be used in combination with other forms of tourism – especially the cultural tourism – so that the expected benefits for the local community to be increased (Wahab et al 1997, 215). On the other hand, Hall (2005) notes that the primary reason for the establishment of urban tourism has been the need for the achievement of specific economic benefits for cities worldwide (Hall 2005, 196); thus, when similar initiatives are undertaken, it is necessary that their economic benefits – referring to econo mic benefits for the communities involved - are taken into consideration. 3. Urban tourism in East end London – Spitalfield Market 3.1 Current role of Spitalfield Market as a destination of urban tourism In order to identify the potential role of SpitalField Market as a destination of urban tourism it would be necessary to refer primarily to the Market’s characteristics – structure and facilities. Moreover, it would be important to describe briefly the products available in the particular Market; the range and the types of these products could be used in order to prove the value of the Market for promoting products of specific qualities/ variety. In accordance with a recent

Research Anaylsis Essay Example | Topics and Well Written Essays - 750 words

Research Anaylsis - Essay Example The â€Å"No Child Left Behind Policy in the United States viewed the teachers as dutiful mechanism to foster that so called proven literacy education programs and methods. This follows the â€Å"Do as I do, not as I say† rule. This method implies that students are more likely to perform well and engaged themselves in any activities especially in reading and writing when they learn from teachers who manifest the same traits. Therefore, the competency of teachers being active readers and writers influence the performance of the students. It brings life to the classroom and affects the students interest and enthusiasm to participate in reading and writing and be effective readers and writers themselves. On the contrary these studies can just be a generalization of the whole scenario. The focus of this analysis is the individual experience and approach of an effective teacher. Individual teacher has different attitude, beliefs and practices. Therefore, the teachers individual capacity will affect their performance in sustaining and delivering effective literacy instruction and learning opportunities to students. This is an individual role for them as educators. As a support to this, Susi (1984) found that teachers assumed different positive writer roles and identities as a result of their participation in writers workshops. They experienced the struggles and joys of composing and revising, which, in turn, not only taught them to be more empathetic to the experiences of their students, hut also "humanized" them to their students. Therefore, the extent of what the teachers would facilitate to their students could be determined by their own experiences. It is absolutely hard to teach something when in fact, a person does not have enough knowledge regarding that subject matter. This is further supported by the report of some other researchers stating that more diverse teacher self-concepts as writers from

Unit 208 Accident Leaflet Essay Example for Free

Unit 208 Accident Leaflet Essay ACCIDENTSAll accidents and injuries must be reported to reception where an accident form can be filled in and depending on severity of injury reported to HSEWhen an accident occurs report to teacher whom can then get a first aider depending on the injury. A severe injury must be reported to the head after ringing 999. General cuts and abrasions can be cleaned with water. Bumps and knocks to the head can be monitored for concussion. Whatever the situation stay calm so distress is not caused to others. Inform parents or carers or next of kin. | ILLNESSReport illness to the tutor, so relevant people can be informed such as carers or parents. Monitor studentsDo they look pale, flushed, have a rash, are they lethargic, quiet or more irritable than normal. ILLNESS OUT OF COLLEGEStudents are asked to ring in and let college staff know they are ill and not attending lessons, so tutors are aware01924 303332| EMERGENCY RESPONSEWHAT TO DO IN AN EMERGENCY| FIRESKnow your fire drillLeave your classroom and head to nearest fire exit. (These are marked on the floor plan of the college, attached. )Make sure all learners leave quickly and orderly. Leave all personal belongings behind. Check toilets and classrooms for any remaining learners. Go to your designated assembly point and await the register. Make sure everyone is okIn the event of a fire raise the alarm do not attempt to extinguish fireRing the fire bell and ring 999| ABUSEIf abuse is suspected or a discloser reportedACTInform your tutor or designated officerAnne-Marie-Spencer01924 303332OUT OF OFFICE HOURSPlease contact Social Care Direct for advice08458503503(24hr)See attached sheet| MISSING LEARNERIf a student is feared missing, firstly inform the class tutor. Try phoning the studentThen do a search of the building and grounds. If they cannot be found then the police and college coordinators should be informed. Next the parents or carers of the student. SECURITYAll visitors must sign inAt the beginning of each class a register should be taken. If an unknown person is in the building report them immediately to reception staff. Any suspicious bags or packages to be reported to reception. |

Behavioural Finance Theory Dissertation

Behavioural Finance Theory Dissertation A survey of behavioral finance 1. Introduction: The Modern investment theory and its application is predicated on the Efficient Markets Hypothesis (EMH), the assumption that markets fully and instantaneously integrate all available information into market prices. Underlying this comprehensive idea is the assumption that the market participants are perfectly rational, and always act in self-interest, making optimal decisions. These assumptions have been challenged. It is difficult to tip over the Neo classical convention that has yielded such insights as portfolio optimization, the Capital Asset Pricing Model, the Arbitrage Pricing Theory, the Cox Ingersoll-Ross theory of the term structure of interest rates, and the Black-Scholes/Merton option pricing model, all of which are predicated on the EMH (Efficient Market Hypothesis) in one way or another. At few points the EMH criticizes the existing literature of behavioral finance, which shows the difference of opinion on psychology economics. The field of psychology has its roots in empirical observation, controlled experimentation, and clinical applications. According to psychology, behavior is the main entity of study, and only after controlled experimental dimensions do psychologists attempt to make inferences about the origins of such behavior. On the contrary, economists typically derive behavior axiomatically from simple principles such as expected utility maximization, making it easier for us to predict economic behavior that are routinely refuted empirically The biggest threats to Modern Portfolio theory is the theory of Behavioral Finance. It is an analysis of why investors make irrational decisions with respect to their money, normal distribution of expected returns generally appears to be invalid and also that the investors support upside risks rather than downside risks. The theory of Behavioral finance is opposite to the traditional theory of Finance which deals with human emotions, sentiments, conditions, biases on collective as well as individual basis. Behavior finance theory is helpful in explaining the past practices of investors and also to determine the future of investors. Behavioral finance is a concept of finance which deals with finances incorporating findings from psychology sociology. It is reviewed that behavioral finance is generally based on individual behavior or on the implication for financial market outcomes. There are many models explaining behavioral finance that explains investors behavior or market irregularities where the rational models fail to provide adequate information. We do not expect such a research to provide a method to make lots of money from the inefficient financial market very fast. Behavioral finance has basically emerged from the theories of psychology, sociology and anthropology the implications of these theories appear to be significant for the efficient market hypothesis, that is based on the positive notion that people behave rationally, maximize their utility and are able to prices observation, a number of anomalies (irregularities) have appeared, which in turn suggest that in the efficient market the principle of rational behavior is not always correct. So, the idea of analyzing other model of human behavior has came up. Further (Gervais, 2001) explained the concept where he says that People like to relate to the stock market as a person having different moods, it can be bad-tempered or high-spirited, it overreacts one day and behaves very normally the other day. As we know that human behavior is unpredictable and it behaves differently in different situations. Lately many researchers have suggested the idea that psychological analysis of investors may be very helpful in understanding the financial markets better. To do so it is important to understand the behavioral finance presenting the concept that The traditional theory has overestimated the rationality of investors , their biases in decisions casting a cumulative impact on asset prices. To many researchers the study of behavior in finance appeared to be a revolution. As it transforms peoples mentality and perception about the markets and factors that influence the markets. â€Å"The paradigm is shifting. People are continuing to walk across th e border from the traditional to the behavioral camp†. (Gervais, 2001, P.2). On the contrary some people believe that may be its too early call it a revolution. Eugene Fama( Gervais, 2001) argued that Behavioral finance has not really shown impacts on the world prices, and the models contradict each other on different point of times. Giving very less account to the behaviorist explanations of trends and the irregularities †anomaly† (any occurrence or object that is strange, unusual, or unique) Also argued that in order to locate the patterns the data mining techniques are much helpful.. Other researchers have also criticized the idea that the behavioral finance models tend to replace the traditional models of market functions. The weaknesses in this area, explained by him (Gervais, 2001) are that generally overreaction and under reaction are the major causes of the market behavior. Where People take the behavior that seems to be easy for the particular study regardless of the fact that whether these biases are either primary factor of economic forces or not. Secondly, Lack of trained and expert people. The field does not have enough trained professionals both in the psychology or finance fields and therefore as a result the models presented is being put up together are improvised. David Hirshleifer (Gervais, 2001) focuses on the individual behavior impacting asset prices and explaining that the field of behavioral finance is currently in its developmental stage, in its way of development it is facing a lot of disagreement which itself is a productive one. Hirshleifer points out that if we apply the conceptual models of behavioral finance to the corporate finance, it can majorly pay off. If the money managers are incorrectly rational, that means that they are probably not evaluating their investment strategies correctly. They might take wrong decisions in their capital structure decisions. It has been found that quite a few people foresee behavioral finance displacing the age old Efficient Markets theory. On the contrary the underlying assumption that the investors and the managers are completely rational makes insightful sense to many people. 2. Traditional Finance Empirical Evidence: Traditional theory assumes that agents are rational the law of one price holds that is a perfect scenario. Where the law of One price states that securities with the same pay off have same price, but in real world this law is violated when people purchase securities in one market for immediate resale in another, in search of higher profits because of price differentials known as Arbitrageurs. And the agents rationality explains the behavior of investor Professional Individual which is generally inconsistent with the rationality or the future predictions. If a market achieves a perfect scenario where agents are rational law of one price holds then the market is efficient. With the availability of amount of information, the form of market changes. It is unlikely that market prices contain all private information. The presence of noise traders (traders, trading randomly not based on information). Researches show that stock returns are typically unpredictable based on past returns wh ere as future returns are predictable to some extent. Few examples from the past literature explains the problem of irrationality which occurs because of naive diversification, behavior influenced by framing, the tendency of investors of committing systematic errors while evaluating public information.(Glaser et al, 2003) Recent studies suggest that peoples` attitude towards the riskiness of a stock in future the individual interpretation may explain the higher level trading volume, which itself is a vast topic for insight. A problem of perception exist in the investors that Stocks have a higher risk adjusted returns than bonds. Another issue with the investors is that these investors either care about the whole stock portfolio or just about the value of each single security in their portfolio and thus ignore the correlations. The concept of ownership society has been promoted in the recent years where people can take better care of their own lives and be better citizen too if they are both owner of financial assets and homeowners. As a researcher suggested that in order to improve the lives of less advantaged in our society is to teach them how to be capitalist, In order to put the ownership society in its right perspective, behavioral finance is needed to be understood. The ownership society seems very attractive when people appear to make profits from their investments. Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. (Shiller, 2006) According to (Glaser et al, 2003) there are two approaches towards Behavioral Finance, where both tend to have same goals. The goals tend to explain observed prices, Market trading Volume Last but not the least is the individual behavior better than traditional finance models. Belief Based Model: Psychology (Individual Behavior) Incorporates into Model Market prices Transaction Volume. It includes findings such as Overconfidence, Biased Self- Attrition, and Conservatism Representativeness. Preference Based Model: Rational Friction or from psychology Find explanations, Market detects irregularities individual behavior. It incorporates Prospect Theory, House money effect other forms of mental accounting. Behavioral Finance and Rational debate: The article by (Heaton and Rosenberg,2004) highlights the debate between the rational and behavioral model over testability and predictive success. And we find that neither of them actually offers either of these measures of success. The rational approach uses a particular type of rationalization methodology; which goes on to form the basis of behavior finance predictions. A closer look into the rational finance model goes on to show that it employs ex post rationalizations of observed price behaviors. This allows them greater flexibility when offering explanations for economic anomalies. On the other hand the behavior paradigm criticizes rationalizations as having no concrete role in predicting prices accurately, that utility functions, information sets and transaction costs cannot be `rationalized. Ironically they also reject the rational finances explanatory power which plays an essential role in the limits of arbitrage, which actually makes behavioral finance possible. Milton Friedmans theory lays the basis of positive economics. His methodology focuses on how to make a particular prediction; it is irrelevant whether a particular assumption is rational or irrational. According to this methodology, the rational finance model relies on a limited assumption space since all assumptions that are supposedly not rational have been eliminated. This is one of the major reasons behind the little success in rational finance predictions. Despite the minimal results, adherents of this model have criticized the behavioral model as lacking quantifiable predictions that are based on mathematical models. Rational finance has targeted a more important aspect in the structure of the economy, i.e. Investor uncertainty, which further cause financial anomalies. In explaining these assertions, the behavioural emphasises the importance of taking limits in arbitrage. Friedmans methodological approach falls into the category `instrumentalism, which basically states that theories are tools for predictions and used to draw inferences. Whether an assumption is realistic or rational is of no value to an instrumentalist. By narrowing what may or may not be possible, one will inevitably eliminate certain strategies or behaviors which might in fact go on to maximize utility or profits based on their uniqueness. An assumption could be irrational even in the long run, but it is continuously revised and refined to make it into something useful. In opposition to this, many individuals have gone on to say that behaviouralists are not bound by any constraints thus making their explanations systematically irrational. Rubinstein (2001) described how when everyone fails to explain a particular anomaly, suddenly a behavioral aspect to it will come up, because that can be based on completely abstract irrational assumptions. To support rationality, Rubinstein came up with two arguments. Firstly he went on to say that an irrational strategy that is profitable, will only attract copy cat firms or traders into the market. This is supported when a closer look is given towards limits to arbitrage. Secondly through the process of evolution, irrational decisions will eventually be eliminated in the long run. The major achievements characterized of the rational finance paradigm consist of the following: the principle of no arbitrage; market efficiency, the net present value decision rule, derivatives valuation techniques; Markowitzs (1952) mean-variance framework; event studies; multifactor models such as the APT, ICAPM, and the Consumption- CAPM. Despite the number of top achievements that supporters of the rational model claim, the paradigm fails to answer some of the most basic financial economic questions such as `What is the cost of capital for this firm? or `What is its optimal capital structure?; simply because of their self imposed constraints. So far this makes it seem like rational finance and behavioral finance are mutually exclusive. Contrary to this, they are actually interdependent, and overlap in several areas. Take for instance the concept of mispricing when there is no arbitrage. Behavior finance on the other hand suggests that this may not be the case; irrational assumptions in the market will still lead to mispricing. Further even though certain arbitrageurs may be able to identify irrationality induced mispricing, because of the imperfect market information, they are unable to convince investors of its existence. Over here, the rational model is accepting the existence of anomalies which are affected both through the factors of risk and chance; therefore coinciding with the perspective of behavioral finance. Two instances are clear examples of how rationalization is an important limit of arbitrage: i) the build-up and blow-up of the internet bubble; and ii) the superiority of value equity strategies. If we focus on the latter, we are able to see behavioral finance literature that highlights the superiority of such strategies in the ability of analysts to extrapolate results for investors. This is possible when rationalization is taken as a limit to arbitrage. Similarly these strategies may also limit arbitrage against mispricing, through the great risk associated with stocks. In explaining most anomalies it is essential that analysts first conclude whether pricing is rational or not. To prove their hypothesis that irrationality-induced mispricing exists, behaviouralists may find it easier if they accepted the role of rationalization in limits of arbitrage. Slow information diffusion and short-sales constraints are other factors that explain mispricing. However these factors alone cannot form the basis of a strong and concrete explanation that will clarify pricing across firms and also across time. Those supporting the rational paradigm attack behavioral finance adherents in that their predictions for the financial market have been made on irrational assumptions; that are not supported by concrete mathematical or scientific models. In their view the lack of concrete discipline in the methodology adopted in behavior finance leads to the lack of testing in their forecasts. On the other hand the rational model is criticized for its lack of success in financial predictions. The behaviouralists claim that this limitation exists because the supporters of rational finance dismiss aspects of the economic market simply because it may not fall into explainable rational behavior. Both perspectives claim to align themselves with respect to the goals of `testability and `predictions, while at the same time continue to offer evidence against the other model. In reality however, rather than being exclusively mutual both paradigms assist one another in making their predictions. A persons tendency to make errors is known as cognitive bias. These errors are based on the cognitive factors that include statistical judgments, social attribution and memory being common to all the humans in the world. (Crowell, 1994, p. 1) Cognitive bias is the tendency of intelligent, well-informed people to consistently do the wrong thing. The reason behind this cognitive bias is that the Human brain is made for interpersonal relationships and not for processing statistics. The paper discusses facility of forecasts. Generally it is said that the world is divided into two groups: People forecasting positively and people forecasting negatively. These forecasts exaggerate the reliability of their forecasts and trace it to the illusion of validity which exists even when the illusionary character is recognized. (Fisher and Statman, 2000) discussed five cognitive bias, underlying the illusion of validity that are Overconfidence, Confirmation, Representativeness, Anchoring, and Hindsig ht (Shiller, 2002) discusses, that irrational behavior may disappear with more learning and a much more structured situation. As the past research proves it that may of cognitive biases in human judgment value uncertainty will change, they may be convinced if given proper instructions, on the part-experience of irrational behavior. The three most common themes of behavioral finance are as follows: Heuristics, Framing Market Inefficiencies. People when decide on the basis of the rules of thumb regardless of rationalizing suffer from Heuristics. Some forms of Heuristics are: Prospect theory, Loss Aversion, Status quo Bias, Gamblers Fallacy, Self-serving bias and lastly Money illusion. Framing is basically the problem of decision making where the decision is based on the point where there is difference in how the case is presented to the decision maker. Cognitive framing Mental accounting Anchoring are the common forms of Framing 3. Market in efficiencies: As we found out that observed market outcomes are totally opposite to the rational expectations and the efficient market hypothesis. Mis pricing, irrational decision making and return anomalies are the examples of it. These terms have been described as specific market anomaly from a behavioral point of view. Anomaly (economic behavior) Disposition effect Endowment effect Inequity aversion Intertemporal consumption Present-biased preferences Momentum investing Greed and fear Herd behavior Anomalies (market prices and returns) Efficiency wage hypothesis Limits to arbitrage Dividend puzzle Equity premium puzzle Behavioral Economic Models are restricted to a certain observed market anomaly and it adjusts the neo classical models by explaining the phenomenon of Heuristics and framing to the decision makers. It is usually said that economics get along with in the neo classical framework, with just one restriction of the assumption of rationality. Loix et. Al in their paper Orientation towards Finances explains the individual financial management behavior, people dealing with their financial means. They have analyzed the Non-specific Financial behavior as already we see extensive research on the specific finance behavior such as saving, Taxation, Gambling, amassing debt. But they had given a lot of importance to stock market, investors and households. The analysis of general public`s behavior was done, where an ordinary man is not sure and simply act according to the guesses over their money related issues. It was also found that people interested in economic and financial matters are much more active in collecting specific information than general public, stating that financial behavior of household is an important relevant topic that needs to be discussed in much more details. Household financial management is similar to the financial management. The construct of orientation towards finances was developed where the individual ORTO FIN focuses on competencies (interest and skills). Having stronger money attitude is an indication of stronger orientation towards finances and much more effective competencies. Therefore we expect some relevance and similarity between corporate and household management behavior as both require organizing, forecasting, planning and control. (Loix et. Al, 2005) analyzed general publics behavior in basically dividing them into two groups, Financial Information Personal financial planning. Also explaining some practical and theoretical gaps in the area of psychology of money usage, they concluded that ORTOFIN (Orientation towards finance) indicates the involvement of individuals in managing their finances. Proving out the point that active interest in financial information and an urge to plan expenses are two main factors. A stronger ORTFIN indicates: Greater use of debit accounts, Higher savings account, Wide variety of investments, Greater awareness of ones financial Intimate knowledge of the details of Ones savings/deposit accounts obsessed by money, Higher achievement and power in monetary terms, Further age is also inversely proportional. Shiller in 2006, in his article talked about the co-evolution of neo-classical and behavior finance. In 1937 when A. Samuelsson one of the great economists wrote about people maximizing the present value of utility subject to a present vale budget constraint. Another judgment he realized was time being consistent human behavior where if at any time t 0 Where people reconsidered the problem of maximization from that date forward, they would not change their decision where as in real life it is totally opposite for example people sometimes try to control themselves by binding their future decision as from history we find out that that some of man make irrevocable trust in the taking out of life insurance as a compulsory savings measure. (shiller, 2006, p.) Considering personal saving rate, saving and down for no reason has emerged as a weakness of human self control. People seem to be vulnerable to complacency from time to time about providing for their own future. The distinction between neoclassical and behavioral finance have therefore been exaggerated. Both of them are not completely different from each other. Behavioral finance is more elastic willing to learn from other sciences and less concerned about the elegance of models whereby explaining human behavior. 4. Investing and cognitive bias: Money Managers and Money management is a very popular phenomenon. The performance in the stock market is measured at the daily basis and not to wait for a highly subjective annual review of ones performance by ones superior. Market grades you on a daily basis. The smarter one is, the more confident one becomes of ones ability to succeed, clients support them by trusting them that eventually helps their careers. But the truth is that few money managers put in sufficient amount of time and effort to figure out what works and develop a set of investment principles to guide their investment decisions (Browne, 2000). Further Browne discussed the importance of asset allocation and risk aversion, in order to understand why we do what we do regardless of whether it is rational or not. General public opts for money Managers to deal with their finances and these managers are categorized in three ways: Value Managers, Growth Managers and Market Neutral Managers. The vast majority of money manag ers are categorized as either value managers or growth managers although a third category, market neutral managers, is gaining popularity these days and may soon rival the so-called strategies of value and growth. Some investment management firms even are being cautious by offering all styles of investments. What too few money managers do is analyze the fundamental financial characteristics of portfolios that produce long-term market beating results, and develop a set of investment principles that are based on those findings. Difference of opinion on the definition of Value is the problem. The reasons for this are two-fold, one being the practical reality of managing large sums of money, and the other related to behavior. As the assets under management of an advisor grow, the universe of potential stocks shrinks. Analyzing that why individual and professional investors do not change their behavior even when they face empirical evidence, that suggests that their decisions are less th an optimal. An answer to this question is said to be that being a contrarian may simply be too risky for the average individual or professional. If a person is wrong on the collective basis, where everyone else also had made a mistake, the consequences professionally and for ones own self-esteem are far less than if a person is wrong alone. The herd instinct allows for the comfort of safety in numbers. The other reason is that individuals try to behave the same way and do not tend to change courses of action if they are happy. If the results are not too painful individuals can be happy with sub-optimal results. Moreover, individuals who tend to be unhappy make changes often and eventually end up being just as unhappy in their new circumstances. According to the traditional view of Investment management, fundamental forces drive markets, however many other investment firms considers to be active and working out based on their experienced Judgment. It is also believed that Judgmental overrides of Value Fundamental forces of markets can be lethal as well as a cause of Financial Disappointment. From the history it has been found that people Override at the wrong times and in most cases would be better off sticking to their investment disciplines (Crowell, 1994) and the reason to this behavior is the Cognitive bias. According to many researchers, stocks of small companies with low price/book ratios provide excess returns. Therefore, given a choice among small cheap stocks large high priced stocks, prominent investors (financial analysts, senior company executives and company directors) will certainly prefer the small cheap ones. But the fact is opposite to this situation where these prominent investors would opt for large high priced ones and so suffer from cognitive bias and further regret. According to a survey in 1992/1993, a research was carried out that included senior executives directors where they were suppose to rank companies in the similar industry ba sed on eight factors. Quality of Management, Quality of products services, Innovativeness, Long term Investment value, Financial soundness, Ability to attract, develop and keep talented people, Responsibility to the community and environment, Wise Use of Corporate assets. (Crowell, 1994). The assumptions that we made were that that Long term investment value should be negatively correlated with size since small stocks provide superior returns. Long term Investment value should have a negative correlation with Price/book since low Price/Book stocks provide superior returns. (Crowell, 1994). Whereas the results of the survey were contrary that stated that Long Term Investment had a positive correlation with the size and also that the Long term investment value had a positive correlation with the Price/Book stocks. According to Shefrin and statman, prominent investors overestimate the probability that a good company is a good stock, relying on the representative heuristics, concluding that superior companies make superior stocks. Aversion to Regret: aversion to regret is different from aversion to risk; Regret is acute when the individual must take responsibility for the final outcome. Aversion to regret leads to a preference for stocks of good companies. The choice of t he stocks of bad companies involves more personal responsibility and higher probability of regret. Therefore, we find there are two major Cognitive errors: We have a double cognitive error: good company always makes good stock (representativeness), and involves less responsibility(Less aversion to regret. (Crowell, 1994,p.3) The Anti Cognitive bias actions would be admitting to your owned stocks, admitting earlier investment mistakes. Further Taking the responsibility for the actions to improve their performance in the future. The reasons for all the available disciplines, tools, and quantitative techniques is to deal with the Cognitive bias error, where the quantitative investment techniques enables the investment managers to overcome cognitive bias, follow sound investment, and eventually be successful contrarian investor(one who rejects the majority opinion, as in economic matters). Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. With the help of two very important examples Shiller explains how Government involvement can influence financial investments of individuals. In April 2005 Tony Blair stated a program when all new born babies were given a birthday present of 250 to 500. The present were to choose among a number of investment alternatives to invest until child comes of age. This is an effect done in order to make the parents feel connected with investments and modern economy. Another example: as it is said that people should be heavily active in stock market when they are young and so generally should reduce the activity with age. According to the conventional rule people should have 100 Age = % age of investment. In 2005 president bush also portfolio announced one such plan for personal account life cycle fund which would be among the option that works will be offered to invest their personal account. It was A centerpiece of the presidents proposal bur a major point to be noticed was the default option. An important aspect of behavioral finance is the human attention is capricious focuses heavily that same times on financial calculations and are subject to distraction and dissipation of default option is central. All this brings us a question that what should an intertemporal optimizer do to manage his portfolio over the lifetime. According to Samuelson someone who wished to maximize the expected value of his intertemporal utility function by managing the allocation of the portfolio between a high yielding asset and less yielding asset would not actually change the allocation through time. Neoclassic finance appears highly relevant to such a discussion in that it offers the appropriate theor etical framework for considering what people ought to do with the portfolio if not what they actually do. Behavioral is beginning to play an important role in public policy such as in social security reforms. 5. Agents Rationality: Global culture Social Contagion: The selective attention exhibited by a human mind is the concept of culture. Every nation, tribe or asocial group has a social cognition reinforced by conversation ritual and symbols, rituals and supposition of a particular nation has a subtle but far reliability affect on human behavior. Some researchers found that the unique customs of people basically appears as a logical outcome of a belief system of a nation group of people. The Cultural factors were one of the major influences on rational or irrational behavior. We find many factors that are same across countries , e.g fashion, music, movies, youthful rebelliou Behavioural Finance Theory Dissertation Behavioural Finance Theory Dissertation A survey of behavioral finance 1. Introduction: The Modern investment theory and its application is predicated on the Efficient Markets Hypothesis (EMH), the assumption that markets fully and instantaneously integrate all available information into market prices. Underlying this comprehensive idea is the assumption that the market participants are perfectly rational, and always act in self-interest, making optimal decisions. These assumptions have been challenged. It is difficult to tip over the Neo classical convention that has yielded such insights as portfolio optimization, the Capital Asset Pricing Model, the Arbitrage Pricing Theory, the Cox Ingersoll-Ross theory of the term structure of interest rates, and the Black-Scholes/Merton option pricing model, all of which are predicated on the EMH (Efficient Market Hypothesis) in one way or another. At few points the EMH criticizes the existing literature of behavioral finance, which shows the difference of opinion on psychology economics. The field of psychology has its roots in empirical observation, controlled experimentation, and clinical applications. According to psychology, behavior is the main entity of study, and only after controlled experimental dimensions do psychologists attempt to make inferences about the origins of such behavior. On the contrary, economists typically derive behavior axiomatically from simple principles such as expected utility maximization, making it easier for us to predict economic behavior that are routinely refuted empirically The biggest threats to Modern Portfolio theory is the theory of Behavioral Finance. It is an analysis of why investors make irrational decisions with respect to their money, normal distribution of expected returns generally appears to be invalid and also that the investors support upside risks rather than downside risks. The theory of Behavioral finance is opposite to the traditional theory of Finance which deals with human emotions, sentiments, conditions, biases on collective as well as individual basis. Behavior finance theory is helpful in explaining the past practices of investors and also to determine the future of investors. Behavioral finance is a concept of finance which deals with finances incorporating findings from psychology sociology. It is reviewed that behavioral finance is generally based on individual behavior or on the implication for financial market outcomes. There are many models explaining behavioral finance that explains investors behavior or market irregularities where the rational models fail to provide adequate information. We do not expect such a research to provide a method to make lots of money from the inefficient financial market very fast. Behavioral finance has basically emerged from the theories of psychology, sociology and anthropology the implications of these theories appear to be significant for the efficient market hypothesis, that is based on the positive notion that people behave rationally, maximize their utility and are able to prices observation, a number of anomalies (irregularities) have appeared, which in turn suggest that in the efficient market the principle of rational behavior is not always correct. So, the idea of analyzing other model of human behavior has came up. Further (Gervais, 2001) explained the concept where he says that People like to relate to the stock market as a person having different moods, it can be bad-tempered or high-spirited, it overreacts one day and behaves very normally the other day. As we know that human behavior is unpredictable and it behaves differently in different situations. Lately many researchers have suggested the idea that psychological analysis of investors may be very helpful in understanding the financial markets better. To do so it is important to understand the behavioral finance presenting the concept that The traditional theory has overestimated the rationality of investors , their biases in decisions casting a cumulative impact on asset prices. To many researchers the study of behavior in finance appeared to be a revolution. As it transforms peoples mentality and perception about the markets and factors that influence the markets. â€Å"The paradigm is shifting. People are continuing to walk across th e border from the traditional to the behavioral camp†. (Gervais, 2001, P.2). On the contrary some people believe that may be its too early call it a revolution. Eugene Fama( Gervais, 2001) argued that Behavioral finance has not really shown impacts on the world prices, and the models contradict each other on different point of times. Giving very less account to the behaviorist explanations of trends and the irregularities †anomaly† (any occurrence or object that is strange, unusual, or unique) Also argued that in order to locate the patterns the data mining techniques are much helpful.. Other researchers have also criticized the idea that the behavioral finance models tend to replace the traditional models of market functions. The weaknesses in this area, explained by him (Gervais, 2001) are that generally overreaction and under reaction are the major causes of the market behavior. Where People take the behavior that seems to be easy for the particular study regardless of the fact that whether these biases are either primary factor of economic forces or not. Secondly, Lack of trained and expert people. The field does not have enough trained professionals both in the psychology or finance fields and therefore as a result the models presented is being put up together are improvised. David Hirshleifer (Gervais, 2001) focuses on the individual behavior impacting asset prices and explaining that the field of behavioral finance is currently in its developmental stage, in its way of development it is facing a lot of disagreement which itself is a productive one. Hirshleifer points out that if we apply the conceptual models of behavioral finance to the corporate finance, it can majorly pay off. If the money managers are incorrectly rational, that means that they are probably not evaluating their investment strategies correctly. They might take wrong decisions in their capital structure decisions. It has been found that quite a few people foresee behavioral finance displacing the age old Efficient Markets theory. On the contrary the underlying assumption that the investors and the managers are completely rational makes insightful sense to many people. 2. Traditional Finance Empirical Evidence: Traditional theory assumes that agents are rational the law of one price holds that is a perfect scenario. Where the law of One price states that securities with the same pay off have same price, but in real world this law is violated when people purchase securities in one market for immediate resale in another, in search of higher profits because of price differentials known as Arbitrageurs. And the agents rationality explains the behavior of investor Professional Individual which is generally inconsistent with the rationality or the future predictions. If a market achieves a perfect scenario where agents are rational law of one price holds then the market is efficient. With the availability of amount of information, the form of market changes. It is unlikely that market prices contain all private information. The presence of noise traders (traders, trading randomly not based on information). Researches show that stock returns are typically unpredictable based on past returns wh ere as future returns are predictable to some extent. Few examples from the past literature explains the problem of irrationality which occurs because of naive diversification, behavior influenced by framing, the tendency of investors of committing systematic errors while evaluating public information.(Glaser et al, 2003) Recent studies suggest that peoples` attitude towards the riskiness of a stock in future the individual interpretation may explain the higher level trading volume, which itself is a vast topic for insight. A problem of perception exist in the investors that Stocks have a higher risk adjusted returns than bonds. Another issue with the investors is that these investors either care about the whole stock portfolio or just about the value of each single security in their portfolio and thus ignore the correlations. The concept of ownership society has been promoted in the recent years where people can take better care of their own lives and be better citizen too if they are both owner of financial assets and homeowners. As a researcher suggested that in order to improve the lives of less advantaged in our society is to teach them how to be capitalist, In order to put the ownership society in its right perspective, behavioral finance is needed to be understood. The ownership society seems very attractive when people appear to make profits from their investments. Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. (Shiller, 2006) According to (Glaser et al, 2003) there are two approaches towards Behavioral Finance, where both tend to have same goals. The goals tend to explain observed prices, Market trading Volume Last but not the least is the individual behavior better than traditional finance models. Belief Based Model: Psychology (Individual Behavior) Incorporates into Model Market prices Transaction Volume. It includes findings such as Overconfidence, Biased Self- Attrition, and Conservatism Representativeness. Preference Based Model: Rational Friction or from psychology Find explanations, Market detects irregularities individual behavior. It incorporates Prospect Theory, House money effect other forms of mental accounting. Behavioral Finance and Rational debate: The article by (Heaton and Rosenberg,2004) highlights the debate between the rational and behavioral model over testability and predictive success. And we find that neither of them actually offers either of these measures of success. The rational approach uses a particular type of rationalization methodology; which goes on to form the basis of behavior finance predictions. A closer look into the rational finance model goes on to show that it employs ex post rationalizations of observed price behaviors. This allows them greater flexibility when offering explanations for economic anomalies. On the other hand the behavior paradigm criticizes rationalizations as having no concrete role in predicting prices accurately, that utility functions, information sets and transaction costs cannot be `rationalized. Ironically they also reject the rational finances explanatory power which plays an essential role in the limits of arbitrage, which actually makes behavioral finance possible. Milton Friedmans theory lays the basis of positive economics. His methodology focuses on how to make a particular prediction; it is irrelevant whether a particular assumption is rational or irrational. According to this methodology, the rational finance model relies on a limited assumption space since all assumptions that are supposedly not rational have been eliminated. This is one of the major reasons behind the little success in rational finance predictions. Despite the minimal results, adherents of this model have criticized the behavioral model as lacking quantifiable predictions that are based on mathematical models. Rational finance has targeted a more important aspect in the structure of the economy, i.e. Investor uncertainty, which further cause financial anomalies. In explaining these assertions, the behavioural emphasises the importance of taking limits in arbitrage. Friedmans methodological approach falls into the category `instrumentalism, which basically states that theories are tools for predictions and used to draw inferences. Whether an assumption is realistic or rational is of no value to an instrumentalist. By narrowing what may or may not be possible, one will inevitably eliminate certain strategies or behaviors which might in fact go on to maximize utility or profits based on their uniqueness. An assumption could be irrational even in the long run, but it is continuously revised and refined to make it into something useful. In opposition to this, many individuals have gone on to say that behaviouralists are not bound by any constraints thus making their explanations systematically irrational. Rubinstein (2001) described how when everyone fails to explain a particular anomaly, suddenly a behavioral aspect to it will come up, because that can be based on completely abstract irrational assumptions. To support rationality, Rubinstein came up with two arguments. Firstly he went on to say that an irrational strategy that is profitable, will only attract copy cat firms or traders into the market. This is supported when a closer look is given towards limits to arbitrage. Secondly through the process of evolution, irrational decisions will eventually be eliminated in the long run. The major achievements characterized of the rational finance paradigm consist of the following: the principle of no arbitrage; market efficiency, the net present value decision rule, derivatives valuation techniques; Markowitzs (1952) mean-variance framework; event studies; multifactor models such as the APT, ICAPM, and the Consumption- CAPM. Despite the number of top achievements that supporters of the rational model claim, the paradigm fails to answer some of the most basic financial economic questions such as `What is the cost of capital for this firm? or `What is its optimal capital structure?; simply because of their self imposed constraints. So far this makes it seem like rational finance and behavioral finance are mutually exclusive. Contrary to this, they are actually interdependent, and overlap in several areas. Take for instance the concept of mispricing when there is no arbitrage. Behavior finance on the other hand suggests that this may not be the case; irrational assumptions in the market will still lead to mispricing. Further even though certain arbitrageurs may be able to identify irrationality induced mispricing, because of the imperfect market information, they are unable to convince investors of its existence. Over here, the rational model is accepting the existence of anomalies which are affected both through the factors of risk and chance; therefore coinciding with the perspective of behavioral finance. Two instances are clear examples of how rationalization is an important limit of arbitrage: i) the build-up and blow-up of the internet bubble; and ii) the superiority of value equity strategies. If we focus on the latter, we are able to see behavioral finance literature that highlights the superiority of such strategies in the ability of analysts to extrapolate results for investors. This is possible when rationalization is taken as a limit to arbitrage. Similarly these strategies may also limit arbitrage against mispricing, through the great risk associated with stocks. In explaining most anomalies it is essential that analysts first conclude whether pricing is rational or not. To prove their hypothesis that irrationality-induced mispricing exists, behaviouralists may find it easier if they accepted the role of rationalization in limits of arbitrage. Slow information diffusion and short-sales constraints are other factors that explain mispricing. However these factors alone cannot form the basis of a strong and concrete explanation that will clarify pricing across firms and also across time. Those supporting the rational paradigm attack behavioral finance adherents in that their predictions for the financial market have been made on irrational assumptions; that are not supported by concrete mathematical or scientific models. In their view the lack of concrete discipline in the methodology adopted in behavior finance leads to the lack of testing in their forecasts. On the other hand the rational model is criticized for its lack of success in financial predictions. The behaviouralists claim that this limitation exists because the supporters of rational finance dismiss aspects of the economic market simply because it may not fall into explainable rational behavior. Both perspectives claim to align themselves with respect to the goals of `testability and `predictions, while at the same time continue to offer evidence against the other model. In reality however, rather than being exclusively mutual both paradigms assist one another in making their predictions. A persons tendency to make errors is known as cognitive bias. These errors are based on the cognitive factors that include statistical judgments, social attribution and memory being common to all the humans in the world. (Crowell, 1994, p. 1) Cognitive bias is the tendency of intelligent, well-informed people to consistently do the wrong thing. The reason behind this cognitive bias is that the Human brain is made for interpersonal relationships and not for processing statistics. The paper discusses facility of forecasts. Generally it is said that the world is divided into two groups: People forecasting positively and people forecasting negatively. These forecasts exaggerate the reliability of their forecasts and trace it to the illusion of validity which exists even when the illusionary character is recognized. (Fisher and Statman, 2000) discussed five cognitive bias, underlying the illusion of validity that are Overconfidence, Confirmation, Representativeness, Anchoring, and Hindsig ht (Shiller, 2002) discusses, that irrational behavior may disappear with more learning and a much more structured situation. As the past research proves it that may of cognitive biases in human judgment value uncertainty will change, they may be convinced if given proper instructions, on the part-experience of irrational behavior. The three most common themes of behavioral finance are as follows: Heuristics, Framing Market Inefficiencies. People when decide on the basis of the rules of thumb regardless of rationalizing suffer from Heuristics. Some forms of Heuristics are: Prospect theory, Loss Aversion, Status quo Bias, Gamblers Fallacy, Self-serving bias and lastly Money illusion. Framing is basically the problem of decision making where the decision is based on the point where there is difference in how the case is presented to the decision maker. Cognitive framing Mental accounting Anchoring are the common forms of Framing 3. Market in efficiencies: As we found out that observed market outcomes are totally opposite to the rational expectations and the efficient market hypothesis. Mis pricing, irrational decision making and return anomalies are the examples of it. These terms have been described as specific market anomaly from a behavioral point of view. Anomaly (economic behavior) Disposition effect Endowment effect Inequity aversion Intertemporal consumption Present-biased preferences Momentum investing Greed and fear Herd behavior Anomalies (market prices and returns) Efficiency wage hypothesis Limits to arbitrage Dividend puzzle Equity premium puzzle Behavioral Economic Models are restricted to a certain observed market anomaly and it adjusts the neo classical models by explaining the phenomenon of Heuristics and framing to the decision makers. It is usually said that economics get along with in the neo classical framework, with just one restriction of the assumption of rationality. Loix et. Al in their paper Orientation towards Finances explains the individual financial management behavior, people dealing with their financial means. They have analyzed the Non-specific Financial behavior as already we see extensive research on the specific finance behavior such as saving, Taxation, Gambling, amassing debt. But they had given a lot of importance to stock market, investors and households. The analysis of general public`s behavior was done, where an ordinary man is not sure and simply act according to the guesses over their money related issues. It was also found that people interested in economic and financial matters are much more active in collecting specific information than general public, stating that financial behavior of household is an important relevant topic that needs to be discussed in much more details. Household financial management is similar to the financial management. The construct of orientation towards finances was developed where the individual ORTO FIN focuses on competencies (interest and skills). Having stronger money attitude is an indication of stronger orientation towards finances and much more effective competencies. Therefore we expect some relevance and similarity between corporate and household management behavior as both require organizing, forecasting, planning and control. (Loix et. Al, 2005) analyzed general publics behavior in basically dividing them into two groups, Financial Information Personal financial planning. Also explaining some practical and theoretical gaps in the area of psychology of money usage, they concluded that ORTOFIN (Orientation towards finance) indicates the involvement of individuals in managing their finances. Proving out the point that active interest in financial information and an urge to plan expenses are two main factors. A stronger ORTFIN indicates: Greater use of debit accounts, Higher savings account, Wide variety of investments, Greater awareness of ones financial Intimate knowledge of the details of Ones savings/deposit accounts obsessed by money, Higher achievement and power in monetary terms, Further age is also inversely proportional. Shiller in 2006, in his article talked about the co-evolution of neo-classical and behavior finance. In 1937 when A. Samuelsson one of the great economists wrote about people maximizing the present value of utility subject to a present vale budget constraint. Another judgment he realized was time being consistent human behavior where if at any time t 0 Where people reconsidered the problem of maximization from that date forward, they would not change their decision where as in real life it is totally opposite for example people sometimes try to control themselves by binding their future decision as from history we find out that that some of man make irrevocable trust in the taking out of life insurance as a compulsory savings measure. (shiller, 2006, p.) Considering personal saving rate, saving and down for no reason has emerged as a weakness of human self control. People seem to be vulnerable to complacency from time to time about providing for their own future. The distinction between neoclassical and behavioral finance have therefore been exaggerated. Both of them are not completely different from each other. Behavioral finance is more elastic willing to learn from other sciences and less concerned about the elegance of models whereby explaining human behavior. 4. Investing and cognitive bias: Money Managers and Money management is a very popular phenomenon. The performance in the stock market is measured at the daily basis and not to wait for a highly subjective annual review of ones performance by ones superior. Market grades you on a daily basis. The smarter one is, the more confident one becomes of ones ability to succeed, clients support them by trusting them that eventually helps their careers. But the truth is that few money managers put in sufficient amount of time and effort to figure out what works and develop a set of investment principles to guide their investment decisions (Browne, 2000). Further Browne discussed the importance of asset allocation and risk aversion, in order to understand why we do what we do regardless of whether it is rational or not. General public opts for money Managers to deal with their finances and these managers are categorized in three ways: Value Managers, Growth Managers and Market Neutral Managers. The vast majority of money manag ers are categorized as either value managers or growth managers although a third category, market neutral managers, is gaining popularity these days and may soon rival the so-called strategies of value and growth. Some investment management firms even are being cautious by offering all styles of investments. What too few money managers do is analyze the fundamental financial characteristics of portfolios that produce long-term market beating results, and develop a set of investment principles that are based on those findings. Difference of opinion on the definition of Value is the problem. The reasons for this are two-fold, one being the practical reality of managing large sums of money, and the other related to behavior. As the assets under management of an advisor grow, the universe of potential stocks shrinks. Analyzing that why individual and professional investors do not change their behavior even when they face empirical evidence, that suggests that their decisions are less th an optimal. An answer to this question is said to be that being a contrarian may simply be too risky for the average individual or professional. If a person is wrong on the collective basis, where everyone else also had made a mistake, the consequences professionally and for ones own self-esteem are far less than if a person is wrong alone. The herd instinct allows for the comfort of safety in numbers. The other reason is that individuals try to behave the same way and do not tend to change courses of action if they are happy. If the results are not too painful individuals can be happy with sub-optimal results. Moreover, individuals who tend to be unhappy make changes often and eventually end up being just as unhappy in their new circumstances. According to the traditional view of Investment management, fundamental forces drive markets, however many other investment firms considers to be active and working out based on their experienced Judgment. It is also believed that Judgmental overrides of Value Fundamental forces of markets can be lethal as well as a cause of Financial Disappointment. From the history it has been found that people Override at the wrong times and in most cases would be better off sticking to their investment disciplines (Crowell, 1994) and the reason to this behavior is the Cognitive bias. According to many researchers, stocks of small companies with low price/book ratios provide excess returns. Therefore, given a choice among small cheap stocks large high priced stocks, prominent investors (financial analysts, senior company executives and company directors) will certainly prefer the small cheap ones. But the fact is opposite to this situation where these prominent investors would opt for large high priced ones and so suffer from cognitive bias and further regret. According to a survey in 1992/1993, a research was carried out that included senior executives directors where they were suppose to rank companies in the similar industry ba sed on eight factors. Quality of Management, Quality of products services, Innovativeness, Long term Investment value, Financial soundness, Ability to attract, develop and keep talented people, Responsibility to the community and environment, Wise Use of Corporate assets. (Crowell, 1994). The assumptions that we made were that that Long term investment value should be negatively correlated with size since small stocks provide superior returns. Long term Investment value should have a negative correlation with Price/book since low Price/Book stocks provide superior returns. (Crowell, 1994). Whereas the results of the survey were contrary that stated that Long Term Investment had a positive correlation with the size and also that the Long term investment value had a positive correlation with the Price/Book stocks. According to Shefrin and statman, prominent investors overestimate the probability that a good company is a good stock, relying on the representative heuristics, concluding that superior companies make superior stocks. Aversion to Regret: aversion to regret is different from aversion to risk; Regret is acute when the individual must take responsibility for the final outcome. Aversion to regret leads to a preference for stocks of good companies. The choice of t he stocks of bad companies involves more personal responsibility and higher probability of regret. Therefore, we find there are two major Cognitive errors: We have a double cognitive error: good company always makes good stock (representativeness), and involves less responsibility(Less aversion to regret. (Crowell, 1994,p.3) The Anti Cognitive bias actions would be admitting to your owned stocks, admitting earlier investment mistakes. Further Taking the responsibility for the actions to improve their performance in the future. The reasons for all the available disciplines, tools, and quantitative techniques is to deal with the Cognitive bias error, where the quantitative investment techniques enables the investment managers to overcome cognitive bias, follow sound investment, and eventually be successful contrarian investor(one who rejects the majority opinion, as in economic matters). Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. With the help of two very important examples Shiller explains how Government involvement can influence financial investments of individuals. In April 2005 Tony Blair stated a program when all new born babies were given a birthday present of 250 to 500. The present were to choose among a number of investment alternatives to invest until child comes of age. This is an effect done in order to make the parents feel connected with investments and modern economy. Another example: as it is said that people should be heavily active in stock market when they are young and so generally should reduce the activity with age. According to the conventional rule people should have 100 Age = % age of investment. In 2005 president bush also portfolio announced one such plan for personal account life cycle fund which would be among the option that works will be offered to invest their personal account. It was A centerpiece of the presidents proposal bur a major point to be noticed was the default option. An important aspect of behavioral finance is the human attention is capricious focuses heavily that same times on financial calculations and are subject to distraction and dissipation of default option is central. All this brings us a question that what should an intertemporal optimizer do to manage his portfolio over the lifetime. According to Samuelson someone who wished to maximize the expected value of his intertemporal utility function by managing the allocation of the portfolio between a high yielding asset and less yielding asset would not actually change the allocation through time. Neoclassic finance appears highly relevant to such a discussion in that it offers the appropriate theor etical framework for considering what people ought to do with the portfolio if not what they actually do. Behavioral is beginning to play an important role in public policy such as in social security reforms. 5. Agents Rationality: Global culture Social Contagion: The selective attention exhibited by a human mind is the concept of culture. Every nation, tribe or asocial group has a social cognition reinforced by conversation ritual and symbols, rituals and supposition of a particular nation has a subtle but far reliability affect on human behavior. Some researchers found that the unique customs of people basically appears as a logical outcome of a belief system of a nation group of people. The Cultural factors were one of the major influences on rational or irrational behavior. We find many factors that are same across countries , e.g fashion, music, movies, youthful rebelliou