DOI: https://doi.org/10.32515/2663-1636.2025.13(46).1.154-165
Theoretical Aspects of Behavioral Finance Research
About the Authors
Larysa Zadorozhnia, Assistant of the Department of Finance, Banking and Insurance, Central Ukrainian National Technical University, Kropyvnitskiy, Ukraine, ORCID: https://orcid.org/0000-0001-9075-3011, e-mail: larryshechka@gmail.com
Abstract
The article defines the purpose of the research as the theoretical substantiation of the essence and evolution of behavioral finance as an important field of modern financial science. The relevance of the topic is determined by the need to reconsider traditional approaches to the financial behavior of economic agents in the context of increasing risks, financial market instability, and globalization processes. The study emphasizes the importance of analyzing psychological, cognitive, and social factors that influence decision-making in the financial sphere to develop more effective mechanisms for market regulation and to enhance the stability of financial systems.
The research analyzes the historical origins and key stages in the development of behavioral finance as an interdisciplinary field of knowledge that integrates economics, psychology, and sociology. The main scientific concepts and theories are examined, including prospect theory, the hypothesis of market inefficiency, and the concepts of irrational behavior and behavioral anomalies. The contribution of prominent scholars such as D. Kahneman, A. Tversky, and R. Shiller to the development of behavioral finance is highlighted, as well as methodological approaches to studying the influence of emotional and cognitive factors on investor behavior and financial markets in general. The practical significance of behavioral finance for improving market fluctuation forecasting and developing effective investment strategies is also outlined.
The study concludes that behavioral finance is a valuable tool for explaining deviations from classical financial models based on the assumption of rational economic agents. It is demonstrated that applying behavioral approaches deepens the understanding of the motives and mechanisms behind financial decision-making, helps to identify potential risks in the markets, and enhances the effectiveness of regulatory policies. The findings of the research are of both theoretical and practical importance, providing a foundation for further scientific developments and the formulation of practical recommendations to minimize the negative impact of behavioral biases in the financial sphere.
Keywords
behavioral finance, economic behavior, cognitive biases, prospect theory, financial markets, investors, decision-making psychology
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References
1. Barberis, N., & Thaler, R. (2003). A survey of behavioral finance. Handbook of the Economics of Finance, 1, 1053–1128. [in English]. https://doi.org/10.1016/S1574-0102(03)01027-6.
2. De Bondt, W. F. M., & Thaler, R. (1985). Does the stock market overreact? The Journal of Finance, 40(3), 793–805. [in English]. https://doi.org/10.1111/j.1540-6261.1985.tb05004.x .
3. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–292. https://www.jstor.org/stable/1914185 [in English].
4. Nofsinger, J. R. (2017). The psychology of investing (6th ed.). Routledge. [in English]. https://doi.org/10.4324/9781315230856 .
5. Pompian, M. M. (2006). Behavioral finance and wealth management: How to build optimal portfolios that account for investor biases. Hoboken, NJ: John Wiley & Sons. https://alitsaki.ir/wp-content/uploads/2019/08/Behavioral-Finance-and-Wealth-Management.pdf [in English].
6. Statman, M. (1999). Behavioral finance: Past battles and future engagements. Financial Analysts Journal, 55(6), 18–27. [in English]. https://doi.org/10.2469/faj.v55.n6.2311 .
7. Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124–1131. [in English]. https://doi.org/10.1126/science.185.4157.1124.
8. Festinger, L., Riecken, H. W., & Schachter, S. (1956). When prophecy fails: A social and psychological study. https://ia802802.us.archive.org/4/items/pdfy-eDNpDzTy_dR1b0iB/Festinger-Riecken-Schachter-When-Prophecy-Fails-1956.pdf [in English].
9. Shiller, R. J. (1999). Human behavior and the efficiency of the financial system. Handbook of Macroeconomics, 1, 1305–1340. [in English] https://doi.org/10.1016/S1574-0048(99)10033-8.
10. Shleifer, A. (2000). Inefficient markets: An introduction to behavioral finance. Oxford University Press. https://www.scribd.com/document/399120494/andrei-shleifer-inefficient-markets-an-introduction-to-behavioural-finance-225-pdf [in English].
Citations
1. Barberis, N., & Thaler, R. A Survey of Behavioral Finance. Handbook of the Economics of Finance, 2003, 1, 1053–1128. URL: DOI: https://doi.org/10.1016/S1574-0102(03)01027-6 (дата звернення: 14.03.2025).
2. De Bondt, W. F. M., & Thaler, R. Does the Stock Market Overreact? The Journal of Finance,1985, 40(3), 793–805. URL: DOI: https://doi.org/10.1111/j.1540-6261.1985.tb05004.x (дата звернення: 14.03.2025).
3. Kahneman, D., & Tversky, A. Prospect Theory: An Analysis of Decision under Risk. Econometrica, 1979, 47(2), 263–292. URL: https://www.jstor.org/stable/1914185 (дата звернення: 14.03.2025).
4. Nofsinger, J. R. The Psychology of Investing. Routledge. DOI: https://doi.org/10.4324/9781315230856 (дата звернення: 14.03.2025).
5. Pompian, M. M. Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases. Hoboken, New Jersey: John Wiley & Sons, Inc., 2006. 256 p.URL: https://alitsaki.ir/wp-content/uploads/2019/08/Behavioral-Finance-and-Wealth-Management.pdf (дата звернення: 14.03.2025).
6. Statman, M. Behavioral Finance: Past Battles and Future Engagements. Financial Analysts Journal, 1999, 55(6), 18–27. DOI: https://doi.org/10.2469/faj.v55.n6.2311 (дата звернення: 14.03.2025).
7. Tversky, A., & Kahneman, D. Judgment under Uncertainty: Heuristics and Biases. Science, 1974, 185(4157), 1124–1131. URL: DOI: https://doi.org/10.1126/science.185.4157.1124 (дата звернення: 14.03.2025).
8. Festinger, L., Riecken, H. W., & Schachter, S. When Prophecy Fails: A Social and Psychological Study. URL: https://ia802802.us.archive.org/4/items/pdfy-eDNpDzTy_dR1b0iB/Festinger-Riecken-Schachter-When-Prophecy-Fails-1956.pdf (дата звернення: 14.03.2025).
9. Shiller, R. J. Human Behavior and the Efficiency of the Financial System. Handbook of Macroeconomics,1999, 1, 1305–1340. DOI: https://doi.org/10.1016/S1574-0048(99)10033-8 (дата звернення: 14.03.2025).
10. Shleifer, A. Inefficient Markets: An Introduction to Behavioral Finance. Oxford University Press., 2000. URL: https://www.scribd.com/document/399120494/andrei-shleifer-inefficient-markets-an-introduction-to-behavioural-finance-225-pdf?language_settings_changed=English (дата звернення: 14.03.2025).
Copyright (c) 2025 Larysa Zadorozhnia
Theoretical Aspects of Behavioral Finance Research
About the Authors
Larysa Zadorozhnia, Assistant of the Department of Finance, Banking and Insurance, Central Ukrainian National Technical University, Kropyvnitskiy, Ukraine, ORCID: https://orcid.org/0000-0001-9075-3011, e-mail: larryshechka@gmail.com
Abstract
Keywords
Full Text:
PDFReferences
1. Barberis, N., & Thaler, R. (2003). A survey of behavioral finance. Handbook of the Economics of Finance, 1, 1053–1128. [in English]. https://doi.org/10.1016/S1574-0102(03)01027-6.
2. De Bondt, W. F. M., & Thaler, R. (1985). Does the stock market overreact? The Journal of Finance, 40(3), 793–805. [in English]. https://doi.org/10.1111/j.1540-6261.1985.tb05004.x .
3. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–292. https://www.jstor.org/stable/1914185 [in English].
4. Nofsinger, J. R. (2017). The psychology of investing (6th ed.). Routledge. [in English]. https://doi.org/10.4324/9781315230856 .
5. Pompian, M. M. (2006). Behavioral finance and wealth management: How to build optimal portfolios that account for investor biases. Hoboken, NJ: John Wiley & Sons. https://alitsaki.ir/wp-content/uploads/2019/08/Behavioral-Finance-and-Wealth-Management.pdf [in English].
6. Statman, M. (1999). Behavioral finance: Past battles and future engagements. Financial Analysts Journal, 55(6), 18–27. [in English]. https://doi.org/10.2469/faj.v55.n6.2311 .
7. Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124–1131. [in English]. https://doi.org/10.1126/science.185.4157.1124.
8. Festinger, L., Riecken, H. W., & Schachter, S. (1956). When prophecy fails: A social and psychological study. https://ia802802.us.archive.org/4/items/pdfy-eDNpDzTy_dR1b0iB/Festinger-Riecken-Schachter-When-Prophecy-Fails-1956.pdf [in English].
9. Shiller, R. J. (1999). Human behavior and the efficiency of the financial system. Handbook of Macroeconomics, 1, 1305–1340. [in English] https://doi.org/10.1016/S1574-0048(99)10033-8.
10. Shleifer, A. (2000). Inefficient markets: An introduction to behavioral finance. Oxford University Press. https://www.scribd.com/document/399120494/andrei-shleifer-inefficient-markets-an-introduction-to-behavioural-finance-225-pdf [in English].
Citations
1. Barberis, N., & Thaler, R. A Survey of Behavioral Finance. Handbook of the Economics of Finance, 2003, 1, 1053–1128. URL: DOI: https://doi.org/10.1016/S1574-0102(03)01027-6 (дата звернення: 14.03.2025).
2. De Bondt, W. F. M., & Thaler, R. Does the Stock Market Overreact? The Journal of Finance,1985, 40(3), 793–805. URL: DOI: https://doi.org/10.1111/j.1540-6261.1985.tb05004.x (дата звернення: 14.03.2025).
3. Kahneman, D., & Tversky, A. Prospect Theory: An Analysis of Decision under Risk. Econometrica, 1979, 47(2), 263–292. URL: https://www.jstor.org/stable/1914185 (дата звернення: 14.03.2025).
4. Nofsinger, J. R. The Psychology of Investing. Routledge. DOI: https://doi.org/10.4324/9781315230856 (дата звернення: 14.03.2025).
5. Pompian, M. M. Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases. Hoboken, New Jersey: John Wiley & Sons, Inc., 2006. 256 p.URL: https://alitsaki.ir/wp-content/uploads/2019/08/Behavioral-Finance-and-Wealth-Management.pdf (дата звернення: 14.03.2025).
6. Statman, M. Behavioral Finance: Past Battles and Future Engagements. Financial Analysts Journal, 1999, 55(6), 18–27. DOI: https://doi.org/10.2469/faj.v55.n6.2311 (дата звернення: 14.03.2025).
7. Tversky, A., & Kahneman, D. Judgment under Uncertainty: Heuristics and Biases. Science, 1974, 185(4157), 1124–1131. URL: DOI: https://doi.org/10.1126/science.185.4157.1124 (дата звернення: 14.03.2025).
8. Festinger, L., Riecken, H. W., & Schachter, S. When Prophecy Fails: A Social and Psychological Study. URL: https://ia802802.us.archive.org/4/items/pdfy-eDNpDzTy_dR1b0iB/Festinger-Riecken-Schachter-When-Prophecy-Fails-1956.pdf (дата звернення: 14.03.2025).
9. Shiller, R. J. Human Behavior and the Efficiency of the Financial System. Handbook of Macroeconomics,1999, 1, 1305–1340. DOI: https://doi.org/10.1016/S1574-0048(99)10033-8 (дата звернення: 14.03.2025).
10. Shleifer, A. Inefficient Markets: An Introduction to Behavioral Finance. Oxford University Press., 2000. URL: https://www.scribd.com/document/399120494/andrei-shleifer-inefficient-markets-an-introduction-to-behavioural-finance-225-pdf?language_settings_changed=English (дата звернення: 14.03.2025).