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Behavioral economics is the study of the psychological (e.g. cognitive, behavioral, affective, social) factors involved in the decisions of individuals or institutions, and how these decisions deviate from those implied by traditional economic theory. [1][2] Behavioral economics is primarily concerned with the bounds of rationality of economic ...
Prospect theory. Daniel Kahneman, who won the 2002 Nobel Memorial Prize in Economics for his work developing prospect theory. Prospect theory is a theory of behavioral economics, judgment and decision making that was developed by Daniel Kahneman and Amos Tversky in 1979. [1] The theory was cited in the decision to award Kahneman the 2002 Nobel ...
Quantitative behavioral finance[ 1 ] is a new discipline that uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation. The research can be grouped into the following areas: Empirical studies that demonstrate significant deviations from classical theories. [ 2 ]
According to Choosing Therapy, “… financial trauma refers to the distress associated with chronic money-related stress, lack of resources, or financial abuse. These difficulties can overwhelm ...
Richard H. Thaler (/ ˈθeɪlər /; [ 1 ] born September 12, 1945) is an American economist and the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. In 2015, Thaler was president of the American Economic Association. [ 2 ]
Finance. A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation. Behavioral finance theory attributes stock market bubbles to cognitive biases that lead to groupthink and herd behavior.
The researchers coined the term "disposition effect" to describe this tendency of holding on to losing stocks too long and to sell off well-performing stocks too readily. Shefrin colloquially described this as a "predisposition toward get-evenitis." John R. Nofsinger has called this sort of investment behavior as a product of the desire to ...
Keynesian beauty contest. A Keynesian beauty contest describes a beauty contest where judges are rewarded for selecting the most popular faces among all judges, rather than those they may personally find the most attractive. This idea is often applied in financial markets, whereby investors could profit more by buying whichever stocks they ...