Department Chair

Dr. Frederick Floss

Date of Award


Access Control

Open Access

Degree Name

Applied Economics, M.A.


Economics and Finance Department


Dr. Theodore Byrley

Department Home page

First Reader

Dr. Theodore Byrley

Second Reader

Dr. Frederick Floss

Third Reader

Dr. Xingwang Qian


The purpose of this thesis is to study the contributions behavioral economics and finance have had on the understanding on how the stock market works. The idea that psychology plays a role in influencing the stock market can be dated back to Adam Smith who wrote about individual’s behavior in his work Theory of Moral Sentiments. It wasn’t until the latter half of the 20th century that behavioral economics became accepted as a counter to Eugene Fama’s widely accepted theory of Efficient Market Hypothesis. This paper will analyze the development of behavioral economics, review the main contributors to the field and review main theories as it relates to the psychology of the human mind, and how it can influence the stock market.