Behavioral Finance Guide
John Spacey, updated on October 03, 2016
Behavioral finance is an approach to modeling markets that considers human cognitive factors. Standard economic models view markets as perfect information processing machines that always efficiently price assets and securities. This differs from the common observation that prices often seem irrationally high or low due to excessive enthusiasm or fear. Behavioral finance focuses on inefficiencies such as errors of logic, herd behavior and emotional decisions that cause inaccurate prices. The following are core concepts of behavioral finance.
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