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What Is Behavioral Finance In Behavioral Economics?

Behavioral finance is a field of study that combines psychology and economics to better understand the behavior of investors and financial markets. Behavioral finance researchers examine the psychological factors that can influence people’s investment decisions, such as emotions, biases, and heuristics, and how these factors can impact the performance of financial markets.

Behavioral finance is based on the idea that people do not always make rational, logical decisions when it comes to money and investing. Instead, their decisions are often influenced by psychological factors, such as fear, greed, and overconfidence. Behavioral finance researchers study these factors in order to better understand why people make the investment decisions that they do, and how these decisions can impact the performance of financial markets. By taking into account the psychological factors that influence people’s decisions, behavioral finance can provide a more complete picture of how financial markets work.

Related Behavioral Economics Terms