IFO Learning Book · Behavioral Finance and Ethics

Rational economic theory assumes people make optimal decisions. Behavioral finance asks why they systematically do not — and what the consequences are for prices, markets, and individual financial outcomes. Ethics in finance asks what obligations follow from operating in a role of financial trust.

This collection covers both. The behavioral finance articles build a taxonomy of cognitive biases, emotional influences, and decision-making heuristics that lead investors, analysts, and markets to deviate from the predictions of classical theory. The ethics articles address the conflicts of interest, professional standards, and integrity requirements that define responsible participation in financial markets.

By the end of this collection, a student should be able to identify at least six cognitive biases by name and example, explain how behavioral biases create market anomalies, describe strategies for mitigating bias in investment decision-making, and articulate the ethical obligations that apply to financial professionals.