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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]
The Journal of Behavioral Finance is a quarterly peer-reviewed academic journal that covers research related to the field of behavioral finance. It was established in 2000 as The Journal of Psychology and Financial Markets. The founding Board of Editors were Brian Bruce, David Dreman, Paul Slovic, Nobel Laureate Vernon Smith and Arnold Wood.
The implications of taxation policy on taxpayers was examined through mental accounting principles in Optimal Taxation with Behavioral Insights. [27] The research paper applied the ideology of the three pillars of optimal taxation, and incorporated mental accounting concepts (as well as misperceptions and internalities).
Behavioral finance [74] is the study of the influence of psychology on the behavior of investors or financial analysts. It assumes that investors are not always rational , have limits to their self-control and are influenced by their own biases . [ 75 ]
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Studies in behavioral finance analyzed this pattern, observing that there is a tendency to avoid high-reward options in the market, as the risk of short-term loss potentially influences the broker. Acclaimed behavioral economists Benartzi and Thaler analyzed this concept, calling it the "equity premium puzzle [2]." This puzzle refers to the ...
Nicholas Barberis and Wei Xiong have depicted the disposition impact as the trade of individual investors are one of the most important realities. The influence, they note, has been recorded in all the broad individual investor trading activity databases available and has been linked to significant pricing phenomena such as post-earnings announcement drift and momentum at the stock level.
[1] [2] Researchers in experimental finance can study to what extent existing financial economics theory makes valid predictions and attempt to discover new principles on which theory can be extended. Experimental finance is a branch of experimental economics and its most common use lies in the field of behavioral finance.