Behavioural Finance and Economic Decision-Making

Behavioural Finance and Economic Decision-Making is a clear, rigorous, and deeply human exploration of how real people actually make financial choices—often in ways that defy textbook logic.

Classical finance assumes rational investors, efficient markets, and optimal decisions. This book begins where those assumptions break down. Drawing on psychology, neuroscience, and real-world market history, Dr. Vikas Kumar Jaiswal reveals that markets are not cold machines but social systems shaped by emotion, cognition, belief, and narrative. Fear, greed, overconfidence, and mental shortcuts quietly influence prices, portfolios, and long-term outcomes.

Bridging theory and practice, the book traces the evolution from traditional models such as Expected Utility Theory, Modern Portfolio Theory, CAPM, and the Efficient Market Hypothesis to the behavioural revolution led by thinkers like Daniel Kahneman, Amos Tversky, Richard Thaler, and Robert Shiller. It explains key concepts such as heuristics, biases, loss aversion, mental accounting, herd behaviour, market anomalies, and behavioural portfolio theory in an accessible yet academically grounded manner.

What sets this book apart is its integrative approach. It connects psychology with economics, ethics with markets, and biology with investment behaviour. Through vivid analogies, historical episodes, real-life examples, and structured learning tools, it shows how emotions originate in the brain, how narratives spread through crowds, and why rational strategies often fail without behavioural discipline.

The final sections move beyond diagnosis to solution. The book offers practical frameworks for designing goal-based portfolios, using index investing as a behavioural shield, and building decision systems that protect investors from their own psychological vulnerabilities. Rather than promising market-beating tricks, it teaches how to align financial decisions with human nature.

Written for students, educators, researchers, finance professionals, and thoughtful investors, Behavioural Finance and Economic Decision-Making is both a foundational textbook and a practical guide. It equips readers not just to understand market behaviour, but to understand themselves—transforming financial “madness” into behavioural wisdom and more resilient decision-making.