Behavioral finance

Glaser, Markus ; Nöth, Markus ; Weber, Martin

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URL:	https://madoc.bib.uni-mannheim.de/2770
URN:	urn:nbn:de:bsz:180-madoc-27702
Document Type:	Working paper
Year of publication:	2003
The title of a journal, publication series:	Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung
Volume:	03-14
Place of publication:	Mannheim
Publication language:	English
Institution:	Außerfakultäre Einrichtungen > SFB 504 (-2008) Business School > ABWL u. Finanzwirtschaft, insbes. Bankbetriebslehre (Weber 1993-2017)
MADOC publication series:	Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject:	330 Economics
Subject headings (SWD):	Anlageverhalten , Theorie
Abstract:	Behavioral finance as a subdiscipline of behavioral economics is finance incorporating findings from psychology and sociology into its theories. Behavioral finance models are usually developed to explain investor behavior or market anomalies when rational models provide no sufficient explanations. To understand the research agenda, methodology, and contributions, this survey reviews traditional finance theory first. Then, this survey shows how modifications (e.g. incorporating market frictions) can rationally explain observed individual or market behavior. In the second section, the survey will explain the behavioral finance research methodology -how biases are modeled, incorporated into traditional finance theories, and tested empirically and experimentally- using one specific subset of the behavioral finance literature, the overconfidence literature.