Why Do Investors Act Irrationally? Behavioral Biases of Herding, Overconfidence, and Overreaction

Ooi Kok Loang

in Vernon Press Titles in Economics from Vernon Art and Science Inc

Abstract: 'Why Do Investors Act Irrationally? Behavioral Biases of Herding, Overconfidence, and Overreaction' explores the powerful psychological forces that drive investor decisions, often leading to irrational behavior and market turbulence. This book provides an in-depth analysis of three critical behavioral biases—herding, overconfidence, and overreaction—that influence investors across various financial markets. Drawing on cutting-edge research and real-world examples, it delves into why even experienced investors sometimes fall prey to these biases, challenging conventional financial theories that assume rational behavior. Designed for scholars, finance professionals, and advanced students, this book fills a gap in behavioral finance literature by examining not just the existence of these biases, but their consequences and the conditions that amplify or mitigate them. Unlike traditional finance texts, which focus primarily on quantitative models, this work bridges psychology and finance, making it uniquely suited for those interested in understanding the ‘why’ behind investor actions. It positions itself alongside essential readings in behavioral finance, offering original insights and a fresh perspective that will be invaluable to researchers, policy advisors, and practitioners alike. Its accessible yet academically rigorous content also makes it ideal for classroom adoption in advanced finance and behavioral economics courses, offering thought-provoking discussion points and practical implications. 'Why Do Investors Act Irrationally?' invites readers to rethink traditional assumptions about financial markets and provides actionable strategies to address the influence of irrational biases in investment decisions, making it an indispensable resource in the evolving field of behavioral finance.

Keywords: Investor psychology; cognitive biases; financial decision-making; social influence; irrationality in markets; emotional finance (search for similar items in EconPapers)
Date: 2025 Written 2025-02-14
Edition: 1
ISBN: 979-8-8819-0242-1
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