New discipline reveals how human behavior impacts financial markets dramatically
The article discusses how traditional economic models struggle to explain financial crises, leading to the rise of behavioral finance. Quantitative Behavioral Finance aims to model how human biases affect asset prices. The paper reviews key theories and introduces agent-based models as a promising way to study investor behavior. These models can capture different types of behaviors and interactions among investors. However, challenges remain in designing and validating these models for real-world applications.