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Behavioral finance: the role of psychology in financial markets (Dutch title: Gedragseconomie: de rol van psychologie op financiële markten)


  • Henriette Prast


(paper is in Dutch) This study surveys the behavioural finance literature. It discusses both the literature that incorporates behavioural considerations into rational models, and the literature that concentrates on the role of prospect theory and the effect of cognitive-psychological mechanisms on the behaviour of financial market participants. The study concentrates on the latter. The implications of cognitive psychology on financial market behaviour are described. Also, the potential consequences of the application of behavioural finance concepts for financial market (in)efficiency are discussed.

Suggested Citation

  • Henriette Prast, 2003. "Behavioral finance: the role of psychology in financial markets (Dutch title: Gedragseconomie: de rol van psychologie op financiële markten)," Research Series Supervision (discontinued) 62, Netherlands Central Bank, Directorate Supervision.
  • Handle: RePEc:dnb:ressup:62

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    Behavioural finance; cognitive psychology; prospect theory;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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