While neoclassical finance cannot explain irrationality and market anomalies, behavioural finance utilizes the principles of psychology to present plausible explanations for observed phenomena. It is argued that neoclassical finance models have failed miserably and that research in neoclassical finance has persisted because of the culture of publish or perish, which dominates contemporary academia. Belief in conspiracy theory is attributed to several behavioural biases, including confirmation bias, proportionality bias, projection, intentionality bias, pattern-seeking, availability bias, overconfidence, anchoring, the bandwagon effect, the base rate fallacy, conservatism and the focusing effect. It is concluded that the unrealistic propositions of neoclassical finance should go the way of the dinosaurs.
KeywordsMarket anomalies Publish or perish Conspiracy theory Confirmation bias Proportionality bias Projection Intentionality bias Pattern-seeking Availability bias Overconfidence Anchoring Bandwagon effect Base rate fallacy Conservatism Focusing effect
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