Understanding Market Behavior: The Psychological Forces Driving Financial Decisions

Muhammed Zakir Hossain
Additional contact information
Muhammed Zakir Hossain: Associate Professor, Department of Business Studies, State University of Bangladesh, Bangladesh

Post-Print from HAL

Abstract: This study examines the influence of cognitive biases, emotions, social factors, and behavioral triggers on market behavior, seeking to integrate traditional economic theories with behavioral finance. This study utilizes a qualitative research methodology, drawing on literature, case studies, and empirical evidence to analyze Prospect Theory, herd behavior, and real -world occurrences such as the GameStop short squeeze and the 2008 financial crisis, thereby demonstrating the impact of behavioral concepts on market dynamics. The results indicate that cognitive biases, including overconfidence and loss aversion, emotional influences such as fear and greed, and social factors, especially exacerbated by digital pl atforms, substantially affect market results, encompassing speculative bubbles and crashes. The study underscores the significance of psychological insights in comprehending market efficiency and provides valuable implications for investors, policymakers, and analysts. Furthermore, it tackles deficiencies in comprehending collective psychological motivators and technological and social trends, offering a thorough framework for the analysis of market behavior in both academic and practical contexts.

Keywords: and financial decision-making; Psychological Drivers; Herd Behavior; Emotional Factors; Cognitive Biases; Behavioral Finance; Market Behavior (search for similar items in EconPapers)
Date: 2026-03-31
References: Add references at CitEc
Citations:

Published in European Journal of Management, Economics and Business, 2026, 3 (2), pp.282-300. ⟨10.59324/ejmeb.2026.3(2).20⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05736622

DOI: 10.59324/ejmeb.2026.3(2).20

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().