Behavioral Finance is a subject closely related to Behavioral Economics. Scientific research on human, social, cognitive and emotional biases is used to better understand economic decisions and how they affect Finance, in particular market prices, returns and the allocation of resources. There is a very interesting and rich history of Behavioral Finace rooted in Behavior Economics and psychology, and today Behavioral Finance is a very important fundamental of finance and can be used to making financial decisions.
During the Classical Period there was a very close link between economics and psychology. Noted Author Adam Smith wrote meaningful words in his 1759 text The Theory of Moral Sentiments. This was an important text in describing an individual's behavior based on psychological principles. Smith's views closely followed those of his mentor Francis Hutcheson. The Theory of Moral Sentiments, Smith's first and in his own mind most important work, outlines his view of proper......
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