Leading Indicators Of Behavioral Finance

Modern finance relies on two key assumptions: a rational homo sapien and a "fair price" being determined by financial markets. Behavioral finance does not serve as a contradiction to these tenets, but complements them by emphasizing the importance of human psychology and groupthink in financial markets. Behavioral finance points to the existence of market bubbles and manias as examples of cases where human behavior may be the missing link that explains such market anomalies. In this article we'll consider two leading behavioral indicators.