The Irrational Decision-Making Mechanism of Investors From the Perspective of Behavioral Finance

Traditional finance builds its theoretical framework based on the assumption of rational people. However, in the real market, investors' decision-making behaviors often deviate from rational expectations. Behavioral finance, by introducing psychological theories, reveals the irrational characteristics of investors in terms of cognitive biases, emotional influences, and group behaviors. Starting from the theoretical origin of behavioral finance, this article systematically analyzes the irrational performance of investors in the links of information processing, risk perception and decision execution, explores the deep impact of emotional fluctuations, social interaction and cognitive limitations on the decision-making mechanism, and proposes practical paths for optimizing investment decisions. Research shows that understanding the mechanism of irrational decision-making is of great significance for constructing financial theories that are closer to market reality.