BEHAVIORAL FINANCE

 Study of the effects of psychology on investors and financial markets.

 Explaining why investors often appear to lack self-control, act against their own best
interest, and make decisions based on personal biases instead of facts.
 Humans and financial markets are not always rational, and the decisions they make are
often flawed.
 It uses psychology and economics to explore why people sometimes make emotional
rather than logical decisions and why their behavior does not follow the predictions of
accepted economic models.
 Behavioral finance combines psychology with finance to examine investor behavior and
understand how people make financial or investment decisions, individually and
collectively. 

 Behavioral finance is an amalgamation of finance and psychology that challenges the

theories put forward by traditional finance.

 How rational investors make irrational decisions.

EFFICIENT MARKET HYPOTHESIS

Finance researchers began to study behavioral finance.
The Efficient Market Hypothesis (EMH) lays down the foundation for traditional finance, which
assumes that investors are rational, informationally efficient, and possess the mental faculties
required to process the information unbiasedly.

 a popular theory that the stock market moves in rational, predictable

ways, doesn’t always hold up under scrutiny.

In reality,

the markets are full of inefficiencies due to investors' flawed thinking

about prices and risk. 
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Annual Review of Financial Economics

Philosophy & Public Affairs
The Journal of Economic Perspectives
Journal of Financial Education
Financial Analysts Journal
(NEW YORK)
1 JSTOR JSTORE.ORG The Journal of Financial and
UNITED STATES
Quantitative Analysis
The Journal of Business
Business Economics
The American Economic Review
Financial Analysts Journal
Journal of Behavioral Finance
Taylor & UNITED
2 TANDFONLINE.COM International Review of Applied
Francis KINGDOM
Economics

JOURNAL OF BEHAVIORAL AND ( Amsterdam )

3 Elsevier ELSEVIER.COM
EXPERIMENTAL FINANCE NETHERLAND

JOURNAL OF BEHAVIORAL DECISION (NEW YORK)

4 Wiley ONLINELIBRARY.WILEY.COM
MAKING UNITED STATES

Emerald
UNITED
5 Group EMARALD.COM REVIEW OF BEHAVIORAL FINANCE
KINGDOM
Publishing