Abstract
AbstractThis chapter is devoted to behavioral finance. It sketches the historical development of this field of research which focuses on the impact of behavioral biases on investment decisions. Key bi ases which are relevant for stock market crashes are introduced: availability bias, representativeness bias, herding bias, overoptimism bias, overconfidence bias, anchoring bias and prospect theory. The chapter ends with using these biases for explaining the October 1987 crash.KeywordsStock MarketInstitutional InvestorProspect TheoryLoss AversionPositive Feedback TradingThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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