Behavioral Finance

Behavioral finance is a field that studies how psychological factors influence investors’ decisions and market outcomes. It suggests that people do not always act rationally or in their best financial interests. Emotions like fear and greed, cognitive biases like overconfidence or loss aversion, and social influences can lead to irrational behaviors, such as panic selling or excessive buying. Understanding these behaviors helps explain market fluctuations and anomalies that traditional finance theories might not fully address, providing a more comprehensive view of how financial markets operate.