Behavioral Finance

What is Behavioral Finance? 

Behavioural finance is a field of study that examines the psychological factors influencing investor behaviour and market outcomes.

Explanation: 

Behavioral finance challenges the traditional assumption of rational decision-making in financial markets. It explores how biases, emotions, and cognitive errors affect investment decisions and market dynamics.

Practical Example of Behavioral Finance: 

An investor learns about the concept of loss aversion from behavioural finance, understanding that they are more sensitive to losses than gains. This awareness helps them recognize their own biases and make more rational investment decisions.

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