This article provides a brief introduction to behavioral finance. Behavioral finance encompassesresearch that drops the traditional assumptions of expected utility maximization with rationalinvestors in efficient markets. The two building blocks of behavioral finance are cognitivepsychology (how people think) and the limits to arbitrage (when markets will be inefficient).The growth of behavioral finance research has been fueled by the inability of the traditional framework to explain many empirical patterns, including stock market bubbles in Japan, Taiwan,and the U.S.