Behavioral finance is the study of the role played by psychological factors in financial decision-making and their effect on overall market outcomes. It examines how individual and group behavior deviates from the rational pursuit of self-interest posited by classical economic theory.
Bounded rationality describes the type of rationality that individuals and organizations utilize when confronted with complex decisions in real-life, fast-moving situations where perfect information is unavailable. Instead of aiming to maximize profits, decision-makers seek acceptable solutions that yield satisfactory results.
