Development of Portfolio Theory: Pricing Deformations and Autonomous Self-regulation of the Financial Market

Abstract

Scientists are looking for a single model of the financial markets. This model must take into account the whole complex of the identified factors and effects, including the achievements of behavioral economics. The scientific novelty of the proposals in this paper is combination the financial prerequisites of the neoclassical school and the achievements of the behavioral finance researchers in a single model. We propose to introduce the concept of the relative value of one percent of the possible positive earnings and the relative value of one percent of the possible negative income. This allows using the mechanism of implicit arbitrage. We also offer a way for the empirical evaluation of the parameters that we offer to make. The results can serve as a basis for the design and evaluation of financial instruments to identify and overcome the preconditions of pricing deformations in the context of modern portfolio theory and autonomous self-regulation of the financial market.

DOI: 10.5901/mjss.2015.v6n6s7p237