Dreman's behavioral finance theory

Dreman's behavioral finance theory highlights how investors often make irrational decisions based on emotions and psychological biases rather than logical analysis. Dreman argues that these biases can lead to market inefficiencies, where stock prices do not reflect their true value. For example, investors might overreact to news, driving prices too high or too low. By recognizing these patterns, savvy investors can exploit opportunities, buying undervalued stocks and selling overvalued ones, ultimately enhancing their investment returns. Essentially, Dreman emphasizes the importance of understanding human behavior in financial markets.