Financial Economics is a branch of economics that focuses on the relationship between financial markets and the economy. It studies how individuals and institutions make decisions regarding investments, savings, and consumption, considering factors like risk and return. This field helps explain how financial assets are priced and how they contribute to economic growth. Key concepts in financial economics include capital markets, portfolio theory, and asset pricing. Researchers analyze how information affects market behavior and how financial instruments can be used to manage risk. Understanding these principles is essential for making informed financial decisions and for the functioning of the overall economy.