Behavioural finance differs from the standard model of finance because behavioural finance
A) Precludes the impact of investor psychology.
B) Includes the impact of investor psychology.
C) Accepts the Efficient Markets Hypothesis.
D) Rejects the idea of market anomalies.
E) None of the above.

Question

Quizplus · Accepted Answer

Behavioural finance differs from the standard model of finance because it includes the impact of investor psychology. It suggests that people do not always make rational decisions when it comes to investing and that they are influenced by cognitive biases, such as overconfidence, herding behavior, and loss aversion. This approach contradicts the Efficient Markets Hypothesis and also recognizes the existence of market anomalies. Thus, option B is the correct answer.

Behavioural Finance Differs from the Standard Model of Finance Because