Articles on Behavioral Finance

Behavioral Finance – An Introduction

As investors, we are often perplexed by the behavior of the markets. For instance, we may find a stock to...

Advantages of Behavioral Finance

The problem with traditional financial theories is that they tend to operate in an ideal world! The underlying assumptions are...

Limitations of Behavioral Finance

The theory of behavioral finance has become exceedingly popular in the past few years. This is largely because of the...

FAQ’s About Behavioral Finance

Behavioral finance is a fairly recent phenomenon. The development of this branch of finance is not more than a few...

Anchoring Bias in Behavioural Finance

The average investor may be able to keep their thinking in check and save themselves from a lot of biases....

Confirmation Bias in Behavioral Finance

The vast majority of investors fail to perform well in the stock market because of behavioral and emotional reasons. The...

Conservatism Bias

In accounting and in finance, conservatism is generally considered to be a positive quality. However, studies in behavioral finance have...

Behavioral Portfolios

There is a fundamental difference in the way portfolios are viewed in traditional financial theories and the way in which...

Cognitive Dissonance Bias

All investors have pre-existing beliefs about the way investment markets work. These beliefs are often deep-rooted and subconscious. For example,...

Home Country Bias

The activities of most investors have historically been limited to their home country. This is largely because earlier, there were...

Availability Bias in Behavioural Investing

All of us have seen movies or have read novels wherein there are several witnesses who are describing the same...

The Bias Blind Spot

We are now aware of the fact that investment markets are not driven by mathematical decisions alone. They are heavily...

Base Rate Fallacy

The human mind is riddled with several fallacies. When human beings make investment decisions, they are battling a wide variety...

Contrarian Investing

The rise of behavioral finance has led to several new strategies being floated in the financial world. Contrarian investing is...

Cultural Influences on Financial Decisions

The financial decisions made by an investor are actually influenced by several factors that are present in their thought process....

Behavioral Life Cycle Theory

There have been many economic theories developed in order to understand how and why human beings save and spend their...

The Barnewall Model

The traditional financial theory assumes that all investors are rational. Hence, they believe that all investors will reach the exact...

Bielard, Biel and Kaiser (BBK) Model

The main criticism of the Barnewall model was that it only classified investors into two types. This created an oversimplification....

Categorizing Behavioral Biases

The field of behavioral finance has become fairly developed over the years. There have been many psychologists as well as...

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