The measurement of overreaction anomaly in the foreign exchange market

Traditional finance; It has been developed on the assumptions that people always make rational decisions, are not biased in their expectations for the future, and that the markets are efficient. Therefore, in traditional finance theories, human psychology is of no importance as people are supposed to act rationally; Human behavior is mechanical. However, in empirical studies, results that contradict these assumptions have been determined and it has been observed that individuals cannot always act rationally under uncertainty and risk. "Behavioral Finance" has begun to take its place in the literature as a result of the studies carried out with the contributions of sociology, especially psychology, to explain these irrational behaviors of individuals. Individuals are affected by psychological factors such as emotions, tendencies and prejudices in their expectations about the future and shape their investments under this influence. Behavioral finance creates market anomalies that traditional finance cannot explain by creating models by taking into account the behavioral tendencies of individuals.