The goal of the working group on behavioral finance is to advance our understanding of financial markets and corporate finance through models of human behavior that are well grounded in psychological research for example, through models that make psychologically realistic assumptions about the way people form beliefs and take decisions under risk. These models are tested and refined through analysis of extensive data sets on financial transactions and asset prices. Major areas of application are household financial choices, the behavior of individual and institutional investors, the pricing of financial assets, and corporate financial decisions. Through the evidence it uncovers, research in behavioral finance often challenges the conclusions of traditional approaches to understanding financial markets.