Behavioral fi nance theories towards traditional fi nance theories Literature review

• Main Author: Blerina Dervishaj
• Format: Article
• Language: English
• Published: International Institute for Private Commercial and Competition Law 2018-06-01
• Series: European Journal of Economics, Law and Social Sciences
• Online Access: http://iipccl.org/wp-content/uploads/2018/06/44-58.pdf

Traditional Finance and Behavioral Finance try to explain investor’s behavior with different arguments and theories. The simplest way to think, is to think about theories of traditional finance how financial markets should function and how investors should behave in an ideal world, whereas for behavioral finance theories, how financial markets function and how investors actually behave in the real world. Understanding both theory and reality, helps investors in making better investment decisions. This paper aims to summarize the main theories of Traditional Finance and Financial Behavior based on the existing literature for the two schools of thought.