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What Is Behavioral Economics?

By Kristi WaterworthUpdated Oct 3, 2025 at 10:06 PM | Fact-checked by Robin Hartill, CFP

Key Points

  • Behavioral economics helps investors understand irrational market behaviors and customer choices.
  • Examples of behavioral economic theories include loss aversion and sunk-cost fallacy.
  • Recognizing irrational behavior can guide your investment decisions.

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