Behavioral Bias in the Stock Market: Consequences for Investor Performance and Market Efficiency

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This analysis reveals behavioral biases affecting investor performance and market efficiency, indicating the need for multidisciplinary strategies.

Behavioral biases lead to suboptimal portfolio performance, resulting in excessive trading and delayed loss realization.
Empirical evidence indicates significant negative impacts on investor returns, with prolonged mispricing durations observed.
These biases aggregate into systemic market anomalies, such as overreaction and herding, undermining market efficiency.
Integrating cognitive psychology with financial economics could enhance market efficiency and improve investor outcomes.

Hanwen Zhang (2025) studied this question.

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This analysis reveals behavioral biases affecting investor performance and market efficiency, indicating the need for multidisciplinary strategies.