ModernFinancevs. BehaviouralFinance: An Overview of Key Concepts and Major Arguments

ArXiv ID: ssrn-746204 “View on arXiv”

Authors: Unknown

Abstract

Modern Finance has dominated the area of financial economics for at least four decades. Based on a set of strong but highly unrealistic assumptions its advocate

Keywords: Modern Finance, Financial Economics, Economic Assumptions, Economic Models, Theoretical Critique, Academic/Financial Economics

Complexity vs Empirical Score

• Math Complexity: 2.0/10
• Empirical Rigor: 1.0/10
• Quadrant: Philosophers
• Why: The paper appears to be a conceptual overview comparing two theoretical frameworks in finance, likely involving descriptive arguments and literature review rather than advanced mathematical models or empirical backtesting.

  flowchart TD
    A["Research Goal:<br>Compare Modern vs. Behavioral Finance"] --> B["Methodology:<br>Literature Review & Conceptual Analysis"]
    B --> C["Inputs:<br>Historical Assumptions &<br>Empirical Anomalies"]
    C --> D{"Computational Process:<br>Theoretical Framework Comparison"}
    D --> E["Modern Finance<br>Assumptions: Rationality, Efficiency"]
    D --> F["Behavioral Finance<br>Assumptions: Psychology, Biases"]
    E --> G["Key Findings:<br>Strong theoretical models<br>but limited real-world predictive power"]
    F --> G