INVESTIGATING THE RELATIONSHIP BETWEEN TRADITIONAL FINANCE PRINCIPLES AND BEHAVIORAL FINANCE APPROACHES: A QUALITATIVE ANALYSIS

Abstract

The aim of this study is to determine the similarities and differences between the rational principles and rules of traditional finance and behavioral finance models, and to reveal that individuals can use both traditional principles and rules and behavioral finance approaches in making financial decisions. In this study, a qualitative analysis method was used to analyze the principles and approaches used in past literature, where these studies were examined, any similarities and/or differences between the views were gathered and recorded systematically. While classical finance approaches state that markets are efficient and people make rational decisions, behavioral finance approaches state that investors can be under psychological and emotional effects during decision making. From this point of view, it has been concluded that behavioral finance approaches, which argue that people act irrationally while taking financial decisions with 12 principles, under the influence of psychological, cognitive and environmental factors, are approaches that cannot be separated from each other with certain lines and have similarities with each other. Because the human being, who is the subject of the financial decision-making process, can make quite rational decisions according to the environment, society and conditions he is in, but in some cases, he can act irrationally.