d it extremely difficult to explain the high prices and the high price-earnings of tech stocks through the conventional measures of dividends and profits. The validity of the efficient market hypothesis is being questioned, and the theory is considered to be too restrictive to account for much of the volatility in the market. As an alternative, financial economists are trying to offer explanations of the irrational behavior of the investors with the help of a science called 'behavioral finance'. While conventional finance and economic theory explanations of market activity assume rational behavior on the part of the investors, the increasing number of crashes and bubbles is evidence of the fact that investors are rarely rational. The growing area of behavioral finance offers explanations for the volatile market activity through the psychological theories of fads and fashions, diffusion of opinions, social movements, information cascades, herd behavior, feedback trading, over-confidence and so on. Though it sounds relative in its original form, financial economists are trying to formalize human behavior into an experimental proposition.
             Human brain does not work like a computer and instead processes information through shortcuts and emotional filters to shorten the time required for analysis. The decision arrived through this filters is not the same which would have been made, if there had been no filters. These filters or shortcuts can be called as psychological biases . The decisions, which are made, are usually not accurate. These can be grouped into two classifications, illusions due to heuristic decision processes and illusions caused by the adoption of mental frames.
             Heuristics refer to rules of thumb that people use to make decisions in complex and uncertain environments. The decision making process is not a strictly rational one and rather the decision maker takes mental 'short cuts' in the process . One...