Behavioral Finance: Several Key Effects of Investor Decision-Making

School of Finance, Zhejiang University of Finance & Economics, Hangzhou, 310018, China

^* Corresponding author: yi03@zufe.edu.cn

Abstract

This paper examines the field of behavioral finance. First, a review of the behavioral finance literature will highlight the key findings and theories that have emerged in this field. Second, this paper will also discuss the practical applications of behavioral finance, including how it can be applied to improve investment decisions and reduce cognitive biases. Finally, several future research directions that may further advance the field of behavioral finance are analyzed, such as exploring the role of emotions in financial decision-making and examining the impact of social factors on investor behavior, pointing out shortcomings and making extensions to current research in this field. This paper will specifically analyze behavioral finance in terms of loss aversion, market anomalies, framing effect and endowment effect, revealing the psychological bias and cognitive bias of human beings in the process of financial decision-making, and providing new perspectives and methods for understanding the operating mechanism of the financial market and investment strategies.