In this chapter, we examined behavioral finance and technical analysis. We learned that a key to becoming a wise investor is to avoid certain types of behavior. By studying behavioral finance, you can see the potential damage to your (or your client's) portfolio from overconfidence and psychologically induced errors.

      The evidence is relatively clear on one point: Investors probably make mistakes. A much more difficult question, and one where the evidence is not at all clear, is whether risks stemming from errors in judgment by investors can influence market prices and lead to market inefficiencies. Market efficiency does not require that all investors behave in a rational fashion. It just requires that some do.

      Nonetheless, many investors try to predict future stock price movements based on investor sentiment, errors in judgment, or historical price movements. Such investors rely on the tools of technical analysis, and we present numerous specific methods used by technical analysts. Whether these tools or methods work is much debated. We close this chapter by noting that it is possible that market prices are influenced by factors like errors in judgment by investors, sentiment, emotion, and irrationality. If they are, however, we are unaware of any scientifically proven method investors such as you can use to profit from these influences.