• Login
  • Register
  • Search

A Brief Review of Behavioral Finance

Matthew Manesh


Different behaviors play a large role in how finance is conducted; the study of financial decisions behind behaviors, psychological influences, and biases is known as Behavioral Finance. Over the past 50 years, Behavioral Finance theories have become mainstream and are among the tools used in a variety of financial industries for financial analysis. There are different theories and behaviors that I will be exploring in this paper: Rational Expectations Theory, Efficient Markets Hypothesis, Utility Theory, Prospect Theory, Anchoring, and Herd Behavior.


Finance; Monetary Management; Investment

Full Text:


Included Database


Grable, J. E. (2000). Financial risk tolerance and additional factors that affect risk taking in everyday money matters. Journal of Business and Psychology, 14(4), 625–630.

Chen J, Risk: What It Means in Investing, How to Measure and Manage It. Available from: https://www.investopedia.com/terms/ r/risk.asp.

Tardi C, Rational Expectations Theory Definition and How It Works. Available from: https://www.investopedia.com/terms/r/ rationaltheoryofexpectations.asp.

Downey L, Efficient Market Hypothesis (EMH): Definition and Critique, Available from: https://www.investopedia.com/terms/e/ efficientmarkethypothesis.asp.

Maverick JB, The Weak, Strong, and Semi-Strong Efficient Market Hypotheses, Available from: https://www.investopedia. com/ask/answers/032615/what-are-differences-between-weak-strong-and-semistrong-versions-efficient-market-hypothesis.asp.

The investopedia team, Utility in Economics Explained: Types and Measurement, Available from: https://www.investopedia. com/terms/u/utility.asp.

Harris C & Wu C. (2014). Using tri-reference point theory to evaluate risk attitude and the effects of financial incentives in a gamified crowdsourcing task. Journal of Business Economics. 84. 281-302.

Prospect Theory: How Users Make Decisions, Available from: https://www.invespcro.com/ blog/prospect-theory/.

Chen J, Prospect Theory: What It Is and How It Works, With Examples, Available from: https://www.investopedia.com/terms/ p/prospecttheory.asp.

Anchoring (cognitive bias), Available from: https://en.wikipedia.org/wiki/Anchoring_ (cognitive_bias)# Experimental_findings.

Hayes A. What Is Anchoring? Available from:https://www. investopedia.com/terms/a/ anchoring.asp.

Hayes A. Herd Instinct, Available from: https://www. investopedia.com/terms/h/ herdinstinct.asp.

Wikipedia, Available from: https://en.wikipedia.org/wiki/ Herd_behavior#Economics_and_ finance.

DOI: http://dx.doi.org/10.18686/fm.v7i5.6499