The classical economic theory propounds that human beings are completely rational decision makers who carefully evaluate all facts and evidences before taking decisions that aim at maximizing outcomes. However it has been found that in real life people are not totally rational, rather they are influenced by various behavioral factors while making decisions. This has led to the emergence of the Behavioral Finance that studies the influence of psychology on financial decisions.The losses or suboptimal outcomes resulting from the irrational decision making of individuals serve as a learning tool for market participants. But, many of the unexplainable behaviour, classified as market anomalies remains questionable. The traditional finance theories have not been quite helpful to answer many questions.Behavioral finance and neuro finance are quite successful in answering many of these questions. Research is being conducted at a staggering pace in the area of neurofinance and behavioral finance.
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