A study of behavioral finance : background, theories and application

Abstract

Behavioral finance, or behavioral economics, uses cognitive and emotional factors in order to understand financial and economic decisions of individuals and institutions. The field is primarily concerned with the issue of the agents' rationality assumed by the traditional neoclassic finance's theories. Behavioral finance encompasses numerous contradictions with traditional finance. This field of study has known increasing progresses over the last years and can propose more and more interesting asumptions and solutions to financial puzzles, unsolved by the traditional field