Review on Behavioral Finance with Empirical Evidence

Tai-Yuen Hon, Massoud Moslehpour () and Kai-Yin Woo
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Tai-Yuen Hon: Business, Economic and Public Policy Research Centre, Hong Kong Shue Yan University, Hong Kong
Kai-Yin Woo: Department of Economics and Finance, Hong Kong Shue Yan University, Hong Kong

Advances in Decision Sciences, 2021, vol. 25, issue 4, 15-41

Abstract: When many anomalies challenge efficiency market hypothesis and rationality, theories of behavioral finance are developed to investigate the psychological effects on human behaviors and how their cognitive biases explain why the market is inefficient, and anomalies exist. This review paper indoctrinates readers in the introductory concepts of behavioral finance with their prominent literature and empirical evidence. Behavioral finance is a fast-growing branch of financial economics, making this review paper beneficial to academics for developing leading-edge usages of financial theory that behavioral finance underlies, and for undertaking empirical studies on behavioral finance models. This paper is furthermore helpful to investors in making investment products and strategy choices that suit their risk preferences and behavioral traits predicted from behavioral models.

Keywords: prospect theory; heuristic; risk-seeking; behavioral bias (search for similar items in EconPapers)
JEL-codes: G10 G40 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aag:wpaper:v:25:y:2021:i:4:p:15-41

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