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The evidence of the outcomes of investor behavior is not easily reconciled with the predictions of traditional economics and finance. For example, investor behavior often
The evidence of the outcomes of investor behavior is not easily reconciled with the predictions of traditional economics and finance. For example, investor behavior often does not generate outcomes that are efficient, which produces suboptimal economic returns and market prices that often deviate from their fundamental values exemplified by bubbles and busts. This is contrary to an important facet of the efficient market hypothesis showing strong evidence that the returns of active market traders or investors are typically below those generated by passive investors. This finding suggests that active decision-making strategies, using modern knowledge technology, including sophisticated data gathering and analyses typically do not beat less calculating behavior that relies on decision-making shortcuts or heuristics. Therefore, what many scholars view as more rational behavior often generates subpar economic and financial outcomes. Would you please offer your thoughts on these issues and identify issues about financial market outcomes that behavioral economics attempts to address and explain
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