Behavioral finance doesn’t use mathematical formulas and graphics like traditional theories. It uses human psychology and sociology to explain how prices are affected by human behaviors. In addition, behavioral finance doesn’t accept... more
Behavioral finance doesn’t use mathematical formulas and graphics like traditional theories. It uses human psychology and sociology to explain how prices are affected by human behaviors. In addition, behavioral finance doesn’t accept that, all of the people have rational behavior. According to behavioral finance, human behavior may have very different views. In this context, reasons of global financial crisis which have affected to whole world, must be interpretated by perspective of the behavioral finance. While financial crisis is interpretated, we can understand that, there are a lot of wrongs like giving credit to people who have low credibility and too hard to explain these wrongs with only traditional methods. For this reason, we have to take advantages of behavioral finance although traditional methods have useful results. Otherwise, we can get misleading informations for investors, companies and individuals.
