Behavioral finance tries to make sense of financial data using models that are based on psychologically accurate assumptions about people's beliefs, preferences, and cognitive limits. I review behavioral finance approaches to understanding asset prices and trading volume, with particular...

Prospect theory, first described in a 1979 paper by Daniel Kahneman and Amos Tversky, is widely viewed as the best available description of how people evaluate risk in experimental settings. While the theory contains many remarkable insights, it has proven challenging to apply these insights in...

Behavioral finance tries to make sense of financial data using models that are based on psychologically accurate assumptions about people's beliefs, preferences, and cognitive limits. I review behavioral finance approaches to understanding asset prices and trading volume, with particular...