Misbehavior of Markets

"Misbehavior of Markets" examines how financial markets often deviate from their ideal, rational models due to human emotions, biases, and social influences. Investors can become overly optimistic or fearful, leading to trends like bubbles or crashes that aren’t justified by fundamentals. This behavior is driven by psychological factors and herd mentality, causing markets to behave unpredictably. Instead of smooth, efficient systems, markets can become volatile and flawed, reflecting collective human psychology more than pure economic data. The book highlights that understanding these biases helps explain why markets sometimes misperform or behave unexpectedly.