Essay: Theories of Behavioral Finance

Sample Essay

The write suggests that theories of behavioral finance are heavily criticized by traditionalists who fear that people may start thinking of finance as being scientifically feeble. The traditional models of financial decision making are criticized in the article which is quite relevant as decisions are not merely based on traditional themes and models and a great deal of human behavior is involved in these decisions as well.

According to the article decision making in behavioral finance is based on two processes one of which is rational decision making based on past experiences, studies and research. Although rational decision making is a part of behavioral finance but people tend to make irrational decisions due to biasness and other factors such as market trends and overreaction  (Olsen, 2008).

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