A systematic approach to maximize stock investors’s rationality

School of Humanities and Social Sciences, Beijing Forestry University, 100083 Beijing, China

^* Corresponding author: Zmy230801105@bjfu.edu.cn

Abstract

When making investments, stock investors are always disturbed by various psychological effects, make irrational decisions, and feel dissatisfied with their decisions afterwards. Therefore, this paper integrates theories of behavioral finance and aims to propose a systematic approach to maximize investor’s rationality.In this way, the investors are more able to achieve their objectives as well as avoid unnecessary losses. The research methods are as follows: first, define the definition and requirements of maximal bounded rationality under non-omniscient and non-omnipotent conditions; second, summarize the typical occurrence scenarios of various psychological effects and propose simple coping methods; finally, construct the above results into a system. This paper, in accordance with the principle of maximal bounded rationality and the general stock investment process, proposes coping methods for each psychological effect by destroying or preventing their occurrence scenarios in a system, letting investors make decisions that are most satisfying to themselves within the knowable range.