Behavioral finance reveals why people make risky financial decisions
The article discusses how traditional finance theory assumes people always make rational decisions when it comes to money. However, this may not be true in real life. Behavioral finance looks at how people actually make financial decisions, considering factors like emotions and biases. Researchers found that people often rely too much on vivid information and are overly confident in their decisions. This new perspective can help explain why some financial outcomes don't match what traditional theory predicts.