Individuals and various business organizations operate in an environment with varying levels of risk. Most economic and financial theories are based on the premise that individuals act rationally, considering all available information when making any decision. However, some studies have shown and proven that this is not always true. Therefore, some researchers and various studies in this field believe that psychological and social studies play a significant role in explaining many of the changes occurring in financial markets, more so than economic theories.

The rapidly growing field of behavioral finance uses insights from psychology to understand how human behavior affects the decisions of investors, markets, managers, individuals, and professional investors. We are all human, which means our behavior is influenced by psychology. Some decisions are simple daily choices, like how hard to study for an upcoming exam or which brand to buy. But other decisions significantly impact our financial well-being, such as whether to buy a particular stock or how to allocate our money among different investment funds.

The purpose of this book is to present what we have learned about financial decision-making from behavioral finance research, while acknowledging the challenges that still face this field. In any science, developments occur through the interaction of theory and practice. Observation suggests a suitable theory, and models are tested using data. When the data does not align with the theory, new models are formulated. The communication between theory and evidence is the ebb and flow of science, and academic finance works in the same way. As you will see as you progress through this book, behavioral finance has been very selective in the tools used for observation. Data can occur naturally, be generated from controlled experiments in a lab, or be obtained through surveys. Experimental finance and economics use the laboratory method to test the validity of existing theories and the impact of new technologies. Looking to the future, we will see that behavioral finance is very useful in helping us understand certain puzzles at the investor level. In psychology, surveys are commonly used by researchers in behavioral finance.

• By: ACKERT, AEAVES
• Translation: Dr. Mohammed Daoud Othman
• Number of Pages: 528
• Year of Publication: 2014
• Binding Type: Hardcover
• Edition: First
• Print Color: Black
• Dimensions (cm): 17x24
• Weight (kg): 0.963
• Barcode: 978995792047