Abstract

The aim of the present review is to give a comprehensive point of view about what has been produced by psychology applied to financial markets. The goal of better understanding investors' behavior arises from the need for reducing the distance between the rational and normative theoretical context and what they actually do since it seems incoherent with rational standards. Cognitive psychology allowed an improved understanding of some investing behaviors that economy describes as specific deflections from rationality, but that are actually induced by systematic cognitive processes. The present review, will describe the theoretical foundations of decision-making, the cognitive processes involved and their consequences for investing. Finally, it will analyze the foundations of the social behaviors that seem to have a prominent role in the determination of prices in the financial markets.