Behavioral Finance: An Overview

Abstract

The intention of this paper is to present a sample of the most influential works in the field of behavioral finance. Modern finance is based on the rational expectation theory of a "world" where investors act in a fully rational manner. Behavioral finance proposes an alternative view. It allows a more realistic "world" where people, and therefore, investors, not necessarily act rationally all the time. As with any survey paper, it is almost impossible to be exhaustive and include all the papers in this area of research, but the paper presented here serves as a representative sample.