Behavioral finance is a field that combines psychology and economics to understand how people make financial decisions. It explores why investors often act irrationally, influenced by emotions, biases, and social factors. For example, people might hold onto losing stocks due to the sunk cost fallacy, believing they need to recover their losses, even when it’s not a smart choice. This discipline also examines how cognitive biases, like overconfidence or herding behavior, can lead to market anomalies. By studying these behaviors, researchers aim to improve investment strategies and help individuals make better financial choices, ultimately leading to more stable markets.