This paper attempts to introduce an overview of the field of behavioral finance, its building blocks and how it relates to the traditional mainstream finance discipline. In addition, it revisits the behavioral life cycle model that is based on the traditional life cycle model. The point of introducing this model is to show that behavioral finance and traditional finance should not be always at war. They could actually complement each other and produce eventually modified models with enhanced predictive power.

Investment and financing decisions are perplexing decisions that keep changing according to the surrounding circumstances and conditions. No matter how much we study them or for how long, they remain partially mysterious and at some points in time unpredictable. That is directly related to the fact that they involve a human aspect into them. And as much as the human brain is fascinating to neurologists and the decision making is amazing to psychologists, so will be the investment and financing decisions to finance academics and professionals.

This necessitated a new vision to the finance discipline, a more open and comprehensive one, a vision that encompasses many other scientific disciplines that directly affect the way we judge and evaluate things. Finance has always been regarded as an outgrowth of economics, a fact that cannot be denied. But ever since its inception it has put focus into areas that were less tapped by economists and has followed a different methodological perspective. According to Ross (1987), finance uses the modeling framework constructed in economics, but within this framework, finance has taken a different methodological perspective. It is not very accurate to characterize finance as simply another of the specialty areas of economics. While finance is specialized in its focus on financial markets, the difference between economics and finance only begins there. The principal distinction is one of methodology rather than focus. He further explains that in finance, the data are voluminous and of high quality and there is always a premium on modeling close to the data. This, in turn, leads to models whose variables are themselves observables rather than abstraction of classes of observables.

Behavioral Finance Journal, Asset Pricing, Contingent States, Capital Asset Pricing Model, Prospect Theory, Financial Literature, Bullish Market, Asymmetric Evaluation, Capital Asset Pricing Model, French Market, Political Crises, Asian Financial Crisis.