Author(s): Pazidis Lesidou
Behavioral finance is a branch of finance that aims to comprehend and explain the systematic financial market consequences of psychological decision-making processes. It applies cognitive psychology, social sciences, and anthropology knowledge to explain irrational investor behaviour that isn't captured by typical rational-based models. The study of the impact of psychology on the conduct of financial practitioners and the resulting effect on markets is known as behavioural finance. Behavioral finance is fascinating because it explains why and how markets can be inefficient. It is a relatively young topic of economics that has recently piqued the interest of investors. Behavioral finance is a relatively young field that attempts to explain why people make illogical financial decisions by combining behavioural and cognitive psychological theories with traditional economics and finance. The planet and its inhabitants, according to mainstream finance theory, are mostly rational "wealth maximizers." However, there are many times when emotion and psychology play a role in our actions, prompting us to act in unreasonable or unanticipated ways. The purpose of this paper is to provide an overview of behavioural finance.