Behavioral Biases and Stock Market Pricing: A Systematic Literature Review

RAHIMEH SADIDI¹

1) Bachelor s Graduate in Financial Management, Islamic Azad University of Mashhad, Iran. Email:

IOI Code : ABKH-ABHCKF
Publication : 4th International Conference on Applied Researches in Humanities, Economics, Management & Accounting(icrhema.com)
Abstract :
    Behavioral finance challenges the Efficient Market Hypothesis by showing that psychological biases systematically distort investor behavior and stock prices. Yet, no comprehensive PRISMA-compliant review has mapped the full scope of these biases, their mechanisms, and moderators across diverse markets. This review addresses three questions: which biases are most studied; how they affect pricing; and what contextual factors moderate their impact. A PRISMA 2020 search of five databases (2020–2024) yielded 87 studies. Overconfidence, herding, loss aversion, anchoring, and the disposition effect are most frequent. These biases operate via noise trading, prospect theory, feedback loops, and information cascades, producing excess volatility, momentum, mean reversion, and mispricing. Effects are stronger in emerging markets, bear markets, among novice retail investors, and in weak regulatory settings. Algorithmic trading and fintech both amplify and mitigate these effects. The literature is maturing but geographically concentrated in South and East Asia, with gaps in informal markets, intersectional demographics, and regulatory solutions. Future work should emphasize cross-national designs, causal methods, and policy-focused research

Keywords : behavioral finance behavioral biases stock market pricing overconfidence herding loss aversion