Behavioral finance: insights from experiments I: theory and financial markets

Abstract

Purpose

The purpose of this paper, and a companion paper (Duxbury, 2015), is to review the insights provided by experimental studies examining financial decisions and market behavior.

Design/methodology/approach

Focus is directed on those studies examining explicitly, or with direct implications for, the most robustly identified phenomena or stylized facts observed in behavioral finance. The themes for this first paper are theory and financial markets.

Findings

Experiments complement the findings from empirical studies in behavioral finance by avoiding some of the limitations or assumptions implicit in such studies.

Originality/value

The authors synthesize the valuable contribution made by experimental studies in extending the knowledge of the functioning of financial markets and the financial behavior of individuals.

Citation

Duxbury, D. (2015), "Behavioral finance: insights from experiments I: theory and financial markets", Review of Behavioral Finance, Vol. 7 No. 1, pp. 78-96. https://doi.org/10.1108/RBF-03-2015-0011