IntroductionIn this research paper, we examine the distinct theories of traditional finance and behavioral finance, relating them to the efficient market hypothesis. The scope of the document covers market anomalies as well as behavioral biases of individuals/analysts and their impact on portfolio construction. Over the past two (2) decades, behavioral finance has seen steady growth. This growth is associated with the realization that investors rarely behave according to the assumptions made in traditional finance and economics. Traditional finance can be seen as currently accepted theories in academic finance, in which the foundation is based on modern portfolio theory and efficiency. market hypothesis. (Baker, 2013) Traditional finance has for decades been the dominant paradigm in which investors are guided when it comes to decision making. Consistent with traditional financial theory, the efficient market hypothesis is one of the most accepted theories among academic financial economists. . This hypothesis posits that markets will operate efficiently when there are a large number of rational, profit-maximizing investors who compete with each other in an effort to predict the future market values ​​of individual securities. For markets to function effectively, it is essential that current information is freely available to all investors. The latter was postulated thanks to the tests carried out by Manderlbort and Samuelson. Additionally, Fama et al. (The Father of Modern Finance) conducted tests to determine whether stock markets are efficient in terms of how quickly they respond to new information. The effect of stock splits on prices was studied by Fama et al. and from their observations it was concluded that...... middle of log...... Saturday and Sunday. Assuming an efficient market, there should be no difference regarding the day of the week. We also observe the holiday effect, which results in unusually high stock returns before stock market holidays. A plausible explanation for this is that during the holidays people feel good, which leads to high purchasing power and, therefore, high returns for the day before the holiday. With these anomalies present in the efficient market hypothesis, the question arises whether we deny the efficient market hypothesis with respect to portfolio construction or should we consider behavioral finance as an alternative to the efficient market hypothesis. .org/learning/products/publications/cp/pages/cp.v24.n.1.4540.aspx