Traditional finance includes the following beliefs:

 Both the market and investors are perfectly rational

 Investors truly care about utilitarian characteristics
 Investors have perfect self-control
 They are not confused by cognitive errors or information processing errors

Behavioral Finance Theory

Investors are treated as “normal” not “rational”
 They actually have limits to their self-control
 Investors are influenced by their own biases
 Investors make cognitive errors that can lead to wrong decisions

anomalies.