ASSET PRICING IN A CAPITAL MARKET

Abstract

This research shows us risks in acquiring assets on capital markets. Behavior of investors uses limited rational theory, adaptive theory of expectations and mind theory. Simon asserted in 1955 that “a normal human being is not entirely rational in making his decisions because of various heuristics and behavioral prejudices.” The hypothesis of adaptive expectations asserts that “adaptive rationality of human preferences and expectations, given that individual decisions are prefered over time, incomplete information, and different learning environments” (Brocas and Carrillo, 2000; Hey, 1994). Compared to EU firms investing in the financial market, Romanian firms invest less because of poor asset quality, labor market uncertainty and inadequate transport infrastructure, according to the EIB survey of December 4th, 2018.

Keywords

• asset
• debt
• pricing
• capital market
• financial market
• risks