La behavioral finance

Until recently theoretical finance was dominated by two dogmas. Individual rational behavior according to the Von Newman-Morgenstein axiomas was the first. Efficient markets where information is instantaneously incorporated in prices was the second. Researchers in behavioral finance have highlighted many situations in which individual decisions are systematically at odds with rationality axiomas. Other researchers have also shown that cases of inefficiencies in markets can be explained by individual irrational behavior. It is the purpose of the new area of finance surveyed in this article to show situations where markets are inefficient and individual behavior irrational.

AFTALION, F. (2002). La behavioral finance. Bankers, Markets and Investors, pp. 59-67.