Quantitative Behavioral Finance is a new discipline that uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation. Some of this endeavor has been lead by Gunduz Caginalp (Professor of Mathematics and Editor of Journal of Behavioral Finance during 2001-2004) and collaborators including Vernon Smith (2002 Nobel Laureate in Economics), David Porter, Don Balenovich, Vladimira Ilieva, Ahmet Duran, Huseyin Merdan). Studies by Jeff Madura, Ray Sturm and others have demonstrated significant behavioral effects in stocks and exchange traded funds.
The research can be grouped into the following areas:
1. Empirical studies that demonstrate significant deviations from classical theories.
2. Modeling using the concepts of behavioral effects together with the non-classical assumption of the finiteness of assets.
3. Forecasting based on these methods.
4. Studies of experimental asset markets and use of models to forecast experiments.
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