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Keywords:

  • behavioural finance;
  • market efficiency;
  • cross-section of stock returns
  • G00;
  • G10;
  • G11;
  • G14;
  • G31;
  • G32;
  • G34

Abstract

I provide a synthesis of the Behavioural finance literature over the past two decades. I review the literature in three parts, namely, (i) empirical and theoretical analyses of patterns in the cross-section of average stock returns, (ii) studies on trading activity, and (iii) research in corporate finance. Behavioural finance is an exciting new field because it presents a number of normative implications for both individual investors and CEOs. The papers reviewed here allow us to learn more about these specific implications.