Title: An Introduction to Behavioral Finance
Headings: An Introduction to Behavioral Finance
An Introduction to Behavioral Finance
Key Takeaways
Some Findings from Behavioral Finance
The Importance of Losses Versus Significance of Gains
The Herd vs. Self
How Practical Is Behavioral Finance?
Frequently Asked Questions
What does behavioral finance tell us?
How does behavioral finance differ from mainstream financial theory?
How does knowing about behavioral finance help?
The Bottom Line

Content: When a market is moving up or down, investors are subject to a fear that others know more or have more information. As a consequence, investors feel a strong impulse to do what others are doing. Behavior finance has also found that investors tend to place too much worth on judgments derived from small samples of data or from single sources. For instance, investors are known to attribute skill rather than luck to an analyst that picks a winning stock. On the other hand, beliefs are not easily shaken. One notion that gripped investors through the late 1990s, for example, was that any sudden drop in the market is a buying opportunity. Indeed, this buy-the-dip view still pervades. Investors are often overconfident in their judgments and tend to pounce on a single "telling" detail rather than the more obvious average. In doing so, they fail to see the larger picture by focusing too much on smaller details. How Practical Is Behavioral Finance?