<p>CB, </p>
<p>The problem with behavioural finance, at least with your example, is that no one knew when the high was. I personally recall well some proponents of irrational exuberance that called the high long before it was reached, such that if a trader believed that data, they would have lost money compared to a buy and hold strategy. </p>
<p>It is easy to use behavioral finance to explain past actions and much harder to use it to make money looking forward. </p>
<p>BTW, if you like behavioral finance, you might enjoy some of the work done by Daniel Kahneman, especially some of his early work with Amos Tversky. They published a wonderful paper in Science about heuristic (although I don’t think it was called by that term then) and biases in reasoning about probability among people.</p>