Behavioral Finance Reveals Market Inefficiencies Driven by Human Psychology
Traditional financial theories often assume rational investors, but behavioral finance exposes the profound impact of emotions and cognitive biases on market dynamics. The Efficient Market Hypothesis (EMH) crumbles under real-world scrutiny, as fear, greed, and social pressures routinely distort asset prices.
Investors consistently deviate from logical decision-making, creating predictable mispricings. These psychological blind spots—from herd mentality to overconfidence—generate exploitable opportunities. Markets aren’t efficient; they’re emotional battlegrounds where disciplined traders profit from collective irrationality.