Behavioral finance: Finance with normal people

“In behavioral finance, humans are normal irrational creatures (Statman, 2014), i.e., creatures affected by cognitive and emotional biases (Statman, 2005; Pompian, 2006; Hirshleifer, 2015).”

“Nowadays investors want to chase not only their financial but also non-financial goals (Statman, 2014), and SRI is the result of such combination of varied investment goals.”

“Metode utama dari perilaku keuangan adalah bahwa investor tidak selalu rasional dan rentan untuk dipengaruhi dalam kondisi pasar yang tidak selalu efisien (Rabin, 1998; Statman, 2014).”

“That's why investors think they can outperform the market thanks to behavioural finance (Statman, 2014).”

“…the fear linked to political instability, war violence that ‘haunts’ their minds according to the grievances they express; but also the hope driven by the purely economic and financial motives which sustain their greed (Lopes, 1987; Statman, 2014; Keltner & Lerner, 2010; Berdal & Malone, 2000).”

“…institutions (This approach takes into account the existence of “normal” investors who, unlike rational investors, are not immune to cognitive errors or false emotions and decision-making are shaped by agents’ emotions, especially in periods of strong volatility (Statman, 2014; Nofsinger, 2005).”

“Investors often lean on heuristics and shortcuts, especially under uncertainty or fast-changing conditions (Hamurcu et al., 2025; Statman, 2014), a pattern confirmed across many investor groups by recent reviews of herding, overconfidence, and anchoring biases (Kumar & Prince, 2023).”

“Statman (2014) further contrasted traditional and behavioral finance.”

“ Financial decision quality (FDQ): a combination of objective indicators (diversification, risk–return) and subjective indicators (satisfaction, perceived sense of control) [41].”

“Negative emotions, such as sadness, fear, and regret, significantly decrease the likelihood of market participation (Statman, 2017), whereas positive emotions enhance investment decision-making (Ackert et al., 2003; Statman, 2014).”

“However, repeated empirical evidence from financial crises, speculative bubbles, and persistent market anomalies challenges these assumptions and reveals systematic deviations from rational behavior [1],[2].”

“Behavioral finance theories suggest that cognitive biases are amplified in stressful or uncertain conditions, further complicating the financial reporting process (Statman, 2014).”

“Index-related financial products, sometimes as futures, options, and structured products, have become commonplace in capital markets for traders/manage investors to hedge, speculate and manage portfolios (Statman, 2014).”

“This interdisciplinary approach has enriched behavioral economics, leading to more nuanced models that capture the complexity of human behavior [23].”

“Investors may show a preference for safer assets or adopt more cautious investment techniques during uncertain market times (Gennaioli et al., 2013; Statman, 2014).”

“It provides bridges between theory, evidence, and practice and replaces some aspects of conventional finance while incorporating others (Statman, 2014).”

“These behavioural finance models substitute classical models, for instance, Behavioural Portfolio Theory for Mean-variance Portfolio Theory, Behavioural Asset Pricing Model for the Capital Asset Pricing Model, and other models where expected returns are determined only by risk (Statman, 2014).”

“The conventional financial theory posits that market price is primarily determined by the behaviour of rational investors and equals the intrinsic value of stock that is estimated by the present value of all dividend payments or firm’s cash flows [1, 4].”

“People's decision-making behaviors are irrational, according to behavioral finance theory (Statman, 2014Behavioral finance is a combination of psychology, sociology, and economics, and behavioral finance theories are derived from these three fields.”

“L’atypie relative au cadrage des conflits des investisseurs africains, marqués par un stimulus négatif d’exposition au risque de faillite, dicte la stigmatisation qu’ils font ou non de leur environnement (Shiller, 2014, Statman, 2014, Kasperson et al., 1988, Kahneman & Tversky, 1979, 1992).”

“Research in behavioral finance is growing in importance vis-à-vis standard finance literature (Statman, 2014; Oprean and Tanasescu, 2014).”

“Cette simplification est forte puisque l’être humain fonde ses décisions sur les émotions ( Statman (2014)).”

“Statman M. (2014), behavioral finance considers an individual normal people rather than rational people. behavioral finance provides alternative blocks for standard finance.”

“Behavioural finance, which was proposed by Statman (2014), is based on the idea that human decision-making often demonstrates irrationality, which has tangible implications for the selection of investments and the management of portfolios.”

“Besides, behavioral finance expands the financial scope beyond the asset pricing portfolio and market efficiency and continues this expansion while adhering to standard finance (Statman, 2014).”

“According to Statman (2014), standard finance has four foundation blocks, including 1) investors are rational (Fama, 1965); 2) markets are efficient (Malkiel & Fama, 1970; Fama, 1998; Fama & French, 2004); 3) investment portfolios should be designed in accordance with the rules of mean-variance…”