Best Strategies for Buying Stocks in a Bear Market : Behavioural Finance and Risk Management

Abstract

Bear markets- Periods of market decline and uncertainty in which investors may get chances to identify mispricing, which can be exploited through intelligent trading strategies (Malkiel, B.G,1989). The objective of this paper is to study is there are any best strategies which can be used by individual investors and to know the importance of behavioral finance in the market. In addition to that the paper investigates the options that can be used for risk management. The Study is based on Secondary data that includes academic literature, news articles, financial reports and expert analysis of the market. The paper found that even with the advancement in technology, the combination of value investing strategy with hedging strategy appears to be the effective strategy for the Investment in a bear market however, it all depends on investors' goals, risk tolerance, and knowledge. In addition to that, liquidity management plays a key role in the market. The paper also finds that Macroeconomic indicators and Federal reserve policies may not be directly useful in a value investing approach, but they play a key role in looking at the overall situation of the market but hedging strategy is directly influenced by macroeconomic indicators so if an investor is using the combination of value investing and hedging strategy microeconomic indicators are more important.