Behavioral Finance

One of the classes in which I am now enrolled is Behavioral Finance. This is the utilization of theories from psychology to explain patterns in the stock market (it can be used for other markets as well, but we've been chiefly dealing with stocks thus far).

This is in oppostion to most financial theory which assumes that the people taking part in the economic interactions are rational actors. The main thrust of the course so far has been calling doubt upon the Efficient Market Hypothesis (EMH), which is one of the big theories in conventional finance. There are 3 forms to the EMH, with varying levels of predictions. Much of the evidence presented in class seems to contradict all three forms.

For a good intro to finance in general, I'd recomend my textbook from my intro course: Principles of Corporate Finance.

The texts for this class are: Inefficient Markets: An Introduction to Behavioral Finance by Andrei Shleifer and Beyond Greed and Fear by Hersh Shefrin.

Here are some other books on the topic.