THE MODERN MODEL OF FINANCE AND BEHAVIORAL FINANCE: A COMPARATIVE STUDY

• DOI: https://doi.org/10.22533/at.ed.5157292617048

• Palavras-chave: Modern finance model, behavioral finance, decision-making.

• Keywords: Modern finance model, behavioral finance, decision-making.

• Abstract:

  The objective of this article was to construct a theoretical reflection on two distinct approaches in the study of finance: the Modern Finance Model, which assumes investor rationality and the maximization of their well-being, and Behavioral Finance, which challenges the assumption of unlimited rationality addressed in the Modern Model by asserting that behaviors influence financial decisions. The methodological basis for this study was a literature review of key scientific publications on the topic, including seminal articles by Alexander H. Simon, Eugene F. Fama, Daniel Kahneman, and Amos Tversky. In summary, the study addressed the definitions of the concepts of modern and behavioral finance, comparing their differences, biases and heuristic processes, cognitive and emotional influences on decision-making, and the behavior of agents in the financial market. Through the analyses, it was found that both approaches make important contributions to the understanding of the general context of finance by researchers, investors, and financial market professionals seeking greater assertiveness in their decisions.