Behavioral Finance and Investor Psychology

Prosperity Pulse Decoding Financial Frequencies · Apr 2, 2026 · 9m

Traditional finance assumes investors are rational, but behavioral finance reveals systematic patterns in how investors actually make decisions. This episode traces the emergence of behavioral finance as a field, examining how psychological biases influence investment decisions. We analyze specific biases—overconfidence (where investors overestimate their knowledge and abilities), availability bias (where recent events disproportionately influence decisions), and anchoring (where initial numbers influence subsequent judgments). The episode explores momentum investing, where investors buy…