Abstract:

The emergence of behavioral finance is based on the knowledge that people do not behave rationally as in traditional financial theories. This is based on the theory of expectation. The theory of expectation facilitates the modeling of irrational behaviors as a result of the change in decision-making methods. The achievement of the individual’s financial objectives increases the level of society’s well-being. Investors who want to their financial goals must also make the right decision. In behavioral finance, there are cognitive and emotional trends that influence individuals’ investment decisions. These tendencies are called predispositions. Cognitive and emotional prejudices make it possible to explain the behavior of the investor. The most commonly used cognitive trends in literature are cognitive contradictions, excessive confidence, representation, presence, scratching and correction, verification, conservation, mental accounting, postpartum effect, frameworking effect, feedback error; the most well-known emotional trends; avoidance of regret, tendency, incapacity to self-control, social interaction, internet, social media. In this study, the most well-known cognitive and emotional prejudices in literature will be discussed conceptually.

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