Author(s): Gerald Plassmann
Behavioral finance examines the psychological factors that influence investor behavior and contribute to market anomalies, challenging the traditional assumptions of rationality in financial decision-making. This paper explores the core principles of behavioral finance, including cognitive biases, emotional influences, and behavioral anomalies, and their implications for investor behavior and market dynamics. By integrating insights from psychology, neuroscience, and economics, behavioral finance provides a deeper understanding of why investors often deviate from rationality and how these deviations lead to market inefficiencies and anomalies. Through a comprehensive analysis of key concepts, empirical findings, and practical applications, this paper offers valuable insights into navigating the complexities of financial markets from a behavioral finance perspective.