Abstract:

Behavioral finance results from an interdisciplinary convergence of cognitive psychology and financial economics. Behavioral finance is a field of finance that proposes psychology-based theories to explain stock market anomalies. Behavioral finance encompasses research that drops the traditional assumptions of expected utility maximization with rational investors in efficient markets. There are many concepts in behavioral finance like overconfidence, anchoring, mental accounting, herd behavior, Gambler’s fallacy, overreaction and availability bias. We first briefly discuss behavioral finance in general, and then we explain the key concepts that lead and guide to behavioral finance

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