Behaviour is caused by reasons.  Reaction and reflection are expressive parts of behaviour.  Apart from reasons there are several other factors that determine behaviour. Beliefs, assumptions, values, environment, relationships, culture, conditions, are some of such factors.

Finance is life-blood of any business.  The crude material for finance is money.  Money through its transactional value and merit of circulation, changes hands and keeps on serving the interests of the person holding it.  Money is the fuel of any business determining the speed and scope, size and shape of any entity, enterprise or institution.  Money, in its broader form, gets termed as finance.

Markets are the places and spaces that provide opportunity for buyer and seller to transact through managing demand and supply of goods and services.  Money being one commodity being bought and sold in the market.  And also as a medium of transaction and exchange for the ease of buyer and seller.

Market, finance, and behaviour enjoy insightful, interesting and enigmatic relationship.  Their interrelationship opens several windows for exploration, research, and practice.  Their interaction culminates into a field of study popularly known as Behavioural Finance.  Behavioural finance is that branch of finance which changes its physical appearance through non-physical actions or invisible forces, through cognitive and psychological interventions.

Money has two faces – physical or tangible, and non-physical or intangible.  The currency part of the money is tangible and value part of the money is intangible.  Bertrand Russell in one of his lectures – The Conflict of Technique and Human Nature, mentions – Two things have led to a diminished pride in workmanship. The earlier was the invention of currency; the later was mass production.  Currency led to the valuation of an article by its pride, which is something not intrinsic, but an abstraction shared with other commodities.

Adam Smith’s invisible hand came to play with money to travel within and beyond tangibility and intangibility aspect of money.  The difference between written value of money and market value of money is the effect of the invisible hand.  The size and shape of money is manipulated through behavioural interventions that take place in the market.

It is almost impossible to predict behaviour.  Behaviour is not static but flexible as it changes depending on a piece of information, situation, nature of relationship, degree of trust, measure of patience, and many more such factors.  If the flow of information can be controlled, behaviour can be influenced.  If market forces can be influenced or manipulated, so could be the influence on behaviour, and so the decisions and choices.

Though market is a place to fulfil the needs and aspirations of people, yet over-presence and over-dependence on market, leads to a situation where we tend to surrender to market forces.  Market starts ruling over people and thus controlling behaviour and decisions. We start serving the market more than it serving us.

All decisions, especially in the stock market are based on emotional value travelling around the notional value.  The cost and value preposition gets determined by the kind of available information and the trend among the investors.  Market conditions get driven by human interventions vis-à-vis the resourcefulness of such individuals who matter.  Rationality and irrationality; presumptions and assumptions; agency and ownership; conventions and consolidations; preferences and priorities; hope and optimism; supposition and proposition; holding and releasing; redeeming and realising; overreaction and underreaction, and many more such factors, begin to influence the decisions.

If one multiplies one’s wealth through using one’s cognitive faculties and capability to make decisions, one takes the ownership of the decision.  But when it is done based on other person’s cognition and over dependence of external forces, the vulnerabilities get exposed and creates a condition of market (or such conditions) leading the decision.

While making appropriate decision, many times heuristics is used.  Heuristics is the process by which humans use mental shortcuts to arrive at decisions.  These shortcuts are practically the biases that decision makers use.  These could be representativeness bias, availability bias, anchoring bias, herding bias, or overconfidence bias.  These influence all kinds of decisions about life, forming perception; judging others; making or breaking relationships; appointing or disappointing employees; buying products or using services; and/or buying or selling stocks.  The investors while choosing stocks often use these shortcuts because of the convenience.

Kahneman and Tversky gave us Prospect Theory in the late 1970s which believed that investors value gains and losses differently as they give more importance to perceived gains as against perceived losses while choosing to invest in different types of stocks.  The force to take decision gets based on the presentation part of it.  It is known as frame dependence and the biases gets operated could be disposition effect and loss or regret aversion.

The literature on behavioural economics and finance is blessed to have voluminous researches on this evolving phenomenon.  Different dimensions of finance, behaviour, and markets are explored in order to defend the importance of money and wealth to make societies peaceful and happy.  Non-physical (valuation) part of money is gaining prominence over the physical part.  Yes, finance is the life-blood of business and money is the mean to lead a happy, peaceful, and comfortable life.

Last half a century has multiplied global and individual wealth across regions.  The number of billionaires is increasing and so are the conflicts and confrontations.  Though weekly working hours are getting reduced yet the work-family conflict is on the rise and the firms are busy devising ways to balance work-life.

Technology has become a catalyst to facilitate decision making at individual, institutional, national, and global level.  I only wish that it does not wire us in a way that we become puppets in the hands of technology and market, that the human becomes machine, and we begin to prioritize the concerns of the machine more than that of the humans.

Niall Ferguson in his celebrated book – The Ascent of Money, begins with – Bread, cash, dosh, dough, loot, lucre, moolah, readies, the wherewithal: call it what you like, money matters.  I read somewhere – God made man, man made money, and the money made the man mad.

In the given times and conditions, may I have the liberty to say – men make machines, machines manipulate markets, market makes money, and money begins to manipulate men through machines and markets.