Abstract
PurposeThis paper aims to give a brief review on behavioral economics and behavioral finance and discusses some of the previous research on agents' utility functions, applicable risk measures, diversification strategies and portfolio optimization.Design/methodology/approachThe authors also cover related disciplines such as trading rules, contagion and various econometric aspects.FindingsWhile scholars could first develop theoretical models in behavioral economics and behavioral finance, they subsequently may develop corresponding statistical and econometric models, this finally includes simulation studies to examine whether the estimators or statistics have good power and size. This all helps us to better understand financial and economic decision-making from a descriptive standpoint.Originality/valueThe research paper is original.
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