The purpose of this second of two companion papers is to further review the insights provided by experimental studies examining financial decisions and market behavior.
Focus is directed on those studies examining explicitly, or with direct implications for, the most robustly identified phenomena or stylized facts observed in behavioral finance. The themes for this second paper are biases, moods and emotions.
Experiments complement the findings from empirical studies in behavioral finance by avoiding some of the limitations or assumptions implicit in such studies.
The author synthesizes the valuable contribution made by experimental studies in extending the knowledge of how biases, moods and emotions influence the financial behavior of individuals, highlighting the role of experimental studies in policy design and intervention.
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