Behavioral Finance as a New Direction in Economic Science

Abstract

Numerous studies confirm and insist that in various situations a person can be influenced by all sorts of irrational factors, such as emotions, feelings, illusions, prejudices, erroneous perceptions, herd instinct, spontaneous decision, and so on. This statement is based on a relatively new financial science - behavioral finance. The reason for the emergence of this branch of economic theory was that the behavior of market participants is far from rational, therefore it does not correspond with the assumptions underlying the classical theory of political economy.