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Behavioral finance

Behavioral finance applies scientific research on human cognitive bias to better understand economic decisions. Notable theorists include Daniel Kahneman, Ron Dembo and Richard Thaler[?]. Key observations made in behavioral finance include the lack of symmetry between decisions to acquire or keep resources, called colloquially the "bird in the bush[?]" paradox, and the strong risk aversion or regret attached to any decision where some emotionally valued resources (e.g. a home) might be totally lost.

A very specific version of behavioral finance, prospect theory, was first advanced by Amos Tversky and Kahneman in 1979. This sought to define economics as a subfield of cognitive science, an effort which was not entirely successful, but which attracted significant attention to the field.



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