Behavioural finance theories explain "why" individuals exhibit behaviours that do not maximize expected utility. Behavioural finance highlights inefficiencies, such as under- or over-reactions to information, as causes of market trends and, in extreme cases, of bubbles and crashes. Such...

We provide the first tests to distinguish whether individual investors equally balance their overall portfolios (naïve portfolio diversification—NPD) or engage in naïve buying diversification (NBD)—equally balancing values in same-day purchases of multiple assets. We find NBD in purchases...

This paper shows that households' mortgage refinancing decisions suboptimally depend on uninformative reference points, imposing a friction to the refinancing channel of monetary policy. I study refinancing behavior in the UK, where on pre-determined dates initial fixed rates reset and...

The hypothesis of this study conducted 50 years ago, is that individuals presented with the same information base cannot agree on their assessments of the subjective probability distribution for a particular variable of interest. Moreover, this is caused by an inability to translate judgment and...