Overview
Behavioral finance is a crucial field that combines psychology and finance to understand how human behavior affects investment decisions and market dynamics. It reveals that investors are not always rational and are influenced by cognitive biases, emotions, and social factors, leading to market anom...
Key Terms
Example: Overconfidence bias leads investors to overestimate their knowledge.
Example: The January effect, where stock prices rise in January.
Example: Investors buying stocks simply because others are doing so.
Example: Investors holding losing stocks too long to avoid realizing a loss.
Example: An investor believing they can predict market movements accurately.
Example: Basing stock value on its initial price rather than current market conditions.