This book provides new methodological, theoretical and applied insights into a continuously developing field of economic and financial psychology. It is based on a number of experimental and survey studies that demonstrate that economic and financial behavior is not necessarily completely rational, and may be considerably affected by various psychological stimuli, usually regarded as "biases." Studies discussed in Part I employ experimental design and examine the effects of hindsight bias and anchoring bias on the perception of economic and financial information. In particular, they concentrate on the effects of pre-existing knowledge and perceived "relevance" of some of the randomly provided anchors on the magnitudes of the exhibited biases. Studies described in Part II are based on a survey among stock market investors and analyze the influence of disposition effect, herd behavior, availability heuristic, gambler's fallacy and hot hand fallacy on the mechanism of stock market decision-making. In particular, they deal with individual differences in the degrees of these biases and with the correlations between the magnitudes of the biases in the cross-section of market investors.

This book summarizes an extensive research on the three main issues of financial practice: Investment, financing and dividend. In this research we tried to confront theory and practice and bring the audience a fresh insight of major financial policies. Our main tool of research was a multinational survey sent to chief financial officers (CFOs) of major companies in the U.S., the U.K., Germany, Canada and Japan. The results of this research are summarized in the first two chapters. While the first chapter deals with general policies adapted by firms, the second chapter examines sectorial differences. Chapters 3 and 4 deals with questions concerning the dividend policy in depth and finally chapters 5 and 6 talks about firms price multipliers and short ratios which are the results of financial corporate policies as predictors of short run abnormal return.