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Review on Behavioral Finance with Empirical Evidence

Author

Listed:
  • Tai-Yuen Hon

    (Business, Economic and Public Policy Research Centre, Hong Kong Shue Yan University, Hong Kong)

  • Massoud Moslehpour

    (Department of Business Administration, Asia University, Taichung, Taiwan)

  • Kai-Yin Woo

    (Department of Economics and Finance, Hong Kong Shue Yan University, Hong Kong)

Abstract

When many anomalies challenge efficiency market hypothesis and rationality, theories of behavioral finance are developed to investigate the psychological effects on human behaviors and how their cognitive biases explain why the market is inefficient, and anomalies exist. This review paper indoctrinates readers in the introductory concepts of behavioral finance with their prominent literature and empirical evidence. Behavioral finance is a fast-growing branch of financial economics, making this review paper beneficial to academics for developing leading-edge usages of financial theory that behavioral finance underlies, and for undertaking empirical studies on behavioral finance models. This paper is furthermore helpful to investors in making investment products and strategy choices that suit their risk preferences and behavioral traits predicted from behavioral models.

Suggested Citation

  • Tai-Yuen Hon & Massoud Moslehpour & Kai-Yin Woo, 2021. "Review on Behavioral Finance with Empirical Evidence," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(4), pages 15-41, December.
    • Handle: RePEc:aag:wpaper:v:25:y:2021:i:4:p:15-41
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    Cited by:

    1. Martín Egozcue & Luis Fuentes García, 2024. "Optimizing hedonic editing for multiple outcomes: an algorithm," Computational Management Science, Springer, vol. 21(2), pages 1-25, December.

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    More about this item

    Keywords

    prospect theory; heuristic; risk-seeking; behavioral bias;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G40 - Financial Economics - - Behavioral Finance - - - General

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