What Are the Strengths and Weaknesses of Behavioral Finance Relative

question 24

Essay

What are the strengths and weaknesses of behavioral finance relative when compared to classical finance?

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Definitions:

Capital Accounts

Accounts on a company's balance sheet that represent the cumulative amount of equity invested by shareholders and retained earnings.

Net Income

The profit of a company after all expenses and taxes have been deducted from total revenue.

Noncumulative

Pertaining to dividends, a feature allowing a company not to pay dividends in arrears to its shareholders.

Treasury Stock

Equities that were once sold to investors and later re-purchased by the entity that issued them, effectively reducing the quantity of stocks traded publicly.