A large body of behavioral finance literature focuses on the behavioral biases of individual investors in their trading choices. The research shows that sophistication is related to the level at which these behavioral biases influence investors' trading choices. This chapter reviews the...

“Investor Behavior: An Overview” is the introduction chapter for the book Investor Behavior: The Psychology of Financial Planning and Investing edited by H. Kent Baker and Victor Ricciardi that presents a historical perspective of investor psychology and theory. The field of investor...

The term “financial psychopath” was coined after the financial crisis of 2007−2008. Intended as a term of derision, the media used it to negatively label financial professionals, rather than to draw a clinical profile. The expression succinctly conveys the widespread post−2008 public...

Financial analysts are important players in the marketplace. Analysts' reports, which include forecasts of earnings and stock recommendations, move market prices. Investors, both large and small, rely on the information in reports when forming their investment decisions. Given the relevance of...

The need for economic stability has received considerable attention during the past few years as a result of the severity of the global recession. Financial pathology arises from personal, cultural, and transpersonal influences that comprise belief systems. In turn, these belief systems inform...

Standard or traditional finance research is based on the rational choice model that assumes market participants are fully rational, unbiased, emotionless, self-interested maximizers of expected utility. Recent research in behavioral finance recognizes that real-world investors and managers are...

Biology can have both constructive and damaging effects on investment decision-making. Both research and clinical evidence confirm that subtle shifts in neurochemistry affect financial decision-making. These alternations in brain functioning are driven by events as mundane as the weather and as...

This chapter introduces an emerging field of study and practice called financial therapy. Financial therapy has applications in furthering the knowledge base around money psychology and addressing maladaptive financial beliefs and decisions of individuals and families. In contrast to traditional...

By linking sell-side equity analysts to their deed records and LinkedIn profiles, I show that analysts with higher exposure to negative wealth shocks issue more pessimistic and less accurate forecasts. The effects are stronger when analysts have higher leverage in their homes and face career...

We discuss a simple, exactly solvable model of stochastic stock dynamics that incorporates regime switching between healthy and distressed regimes. Using this model, which is analytically tractable, we discuss a way of extracting expected returns for stocks from realized CDS spreads,...