The behavioral approach to corporate finance is supported by psychological research on the psychological characteristics and cognitive biases that influence agent behavior.
July 23, 2021. The study of behavioral finance examines how psychological factors affect investors and the financial markets. It focuses on illuminating why investors frequently display a lack of restraint, behave in ways that are detrimental to their own interests, and base judgments on prejudice rather than objective criteria.
To almost the complete exclusion of innate or hereditary variables, behaviorism emphasizes the role of environmental influences in affecting behavior. This essentially equates to a learning emphasis. Through classical or operant conditioning, also referred to as "learning theory," we can acquire new behaviors.
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